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UK Treasury to Explore the Case for Taxing Spread Betting

HM Treasury, the finance regulator in the UK, will examine the legal loophole that allows spread-betting traders to escape income tax, capital gains tax and stamp duty. Under the current rules, spread betting is classified as gambling and as such is exempt from the raft of taxes just enlisted. 
Thanks to an article by LeapRate, we've learned that the situation is about to change as some fierce opposition has emerged in the House of Lords to the tax-free trading activity. 
 
Lord Eatwell, shadow spokesman of the Treasury, and Most Rev Justin Welby, who both participated in the report stage of the discussions of the Financial Services (Banking Reform) Bill, noted that the loophole which exempts spread betters from paying taxes is extraordinary and should be closed. In addition, the Archbishop of Canterbury warned of conflicts of interests arising in the cases of spread-betting traders who work for financial trading firms.
 
To many, such a proposal is not a surprise: after all, we're talking about the country which inspired the famous song “Taxman” by the Beatles. Remember that:
 
If you get too cold, I'll tax the heat,
If you take a walk, I'll tax your feet.
 
On the other hand, this form of tax incentive (if we can label it that way) has paved the way for a growth in the spread-betting business segment. According to the Investment Trends 2012 Leveraged Trading Report, the UK count of spread betters in the 12 months to July 2012 was 92,000, way higher than that of retail FX traders (74,000).  And you must know that Forex traders pay taxes - sometimes they eat as much as 40% of their profits. So why would the Treasury want to impose the same burden on spread betters? Moreover, we should clarify two more things:
 
- Spread-betting traders pay taxes in the UK, in case this is their primary source of income;
- Spread-betting providers pay full-blown taxes and hence contribute plenty to the Treasury's coffers.
 
There is a strong case, therefore, for the tax situation to remain unchanged.
 
On the other hand, if the tax net falls all over spread betters, then a raft of perks for these traders will remain, including the lack of interest/swap charges. Finally, let's mention the absence of fixed net capital requirements for spread betting providers – hence, the UK will still remain a top destination for spread betting, even if the tax loophole is tackled by lawmakers.
TAGS: uk  uk spread betting  uk market  uk forex  uk regulation  regulation spread betting  taxes  tax loophole  leveraged trading  treasury  gambling 

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