Financial spread betting in the UK enjoys a privileged position, comparative to other investments, with notable legal and tax advantages arising from the structure of UK laws. With no capital gains tax or stamp duty applicable on spread betting transactions, plus the hefty potential returns available from high degrees of leverage, successful spread bettors can rest safe in the knowledge that their capital is being put to efficient, effective work in generating low-cost, high-yield returns. But what about trading outwith the UK’s borders?
The exact position of financial spread betting varies between different countries and jurisdictions, with some more amenable to spread betting than others. It is always wise to seek the advice of an accountant local to where you intend to trade, but at the broadest level there can be both legal and tax issues to consider.
The main advantage of spread betting over CFDs is that financial spread betting is tax free but only in the UK and Ireland. Many brokers actually offer spread betting in other countries but those transactions are subject to Capital Gain Tax.
Legality
The first big issue you need to clarify is whether financial spread betting is legal, and if so how it is treated in the eyes of the authorities. In the US, for instance, spread betting is illegal under gambling laws, with US residents prohibited from speculating on spread betting positions. Depending on the legal framework in your country, or in the territory in which you intend to trade your spread betting account (and receive your earnings), you may not be able to access the markets in the first instance.
Seeking professional advice specific to your territory is therefore essential, particularly for those looking to trade larger amounts of capital. In addition to the core issue of legality, there may well be other requirements such as registering with tax authorities or other processes required, and the most comprehensive and time-effective way to achieve this guidance is with the help of a local professional.
Tax Advantage?
Another key issue that rears its head when spread betting outside of the UK is concerned is taxation, and the extent to which the privileged UK tax position is replicated (or otherwise) in the specified territory. The UK’s exemption to CGT and stamp duty mean nothing beyond its borders, and depending on the exact rules and tax system in your territory, spread betting may turn out to be more or less profitable. For example. Australia has a capital gains tax rate of 50%, so it’s clear to see that without both the knowledge of the relevant system and how spread betting is being treated, risk/reward calculations can end up heavily skewed.
When it comes to tax, don’t guess. Do not go by how you think the tax rules should be applied, but how they are actually replied. It might sound obvious, but most people believe they have an understanding of how these issues work, without checking the facts and the relevant legislation. Usually, the services of a professional, either a lawyer or accountant, is the most effective way to achieve this end, and the best way to find out with any certainty that you can trade profitably and legitimately in the territory you chose.