UK Spread Betting Firms May Lose Out On New Tax Regime

Jason Gorringe, Tax-News.com, London

09 March 2001

Although most UK bookmakers were ecstatic yesterday over the abolition of betting duty, spread betting firms were not so pleased by the imposition of the tax on their gross profits. Even though the Chancellor recognised the peculiarities of their business by subjecting them to lower rates of tax than conventional bookies (10% of gross profit from sporting bets and 3% from financial bets), leading firm IG Index said that it would pay more, not less tax in future.

IG Index Chairman, Stuart Wheeler, said that his firm would appeal to the Chancellor to reconsider his plans. But this is the man who recently donated £5m of the profit from his form's flotation to the Tory party, so he may not be flavour of the month in the Treasury.

Mr Wheeler said it was unfair that IG should face a tax increase at the same time as fixed-odds bookies saw their bills fall by more than half. However, IG predicted an annual profit of £14m in its current year, double last year's result, and its shares rose by 9.5 pence to close at 486 pence, despite the likelihood of a higher tax liability - which will have no significant impact on the group until the 2002/2003 financial year.

In spread betting, the punter bets that a result will be outside a given range - either higher or lower - and wins or loses proportionately to the amount by which the result is outside the spread. It is risky: losses can be limited by using derivatives but this is rocket science, and easy to get wrong. On the other hand, there is no capital gains tax on winnings from spread bets.

Recommended