During the second day of a debate on a Financial Services Reform Bill, The UK’s Treasury office spokesman said the government “ought to look” at the “loophole” that allows spread betters to avoid income tax, capital gains tax and stamp duty on transactions, according to a report by the British newspaper The Telegraph.
If the UK tax exemption on spread betting is lifted, British traders in FX and Binary Options might have to start paying all sorts of taxes, complicating and making trading more costly for them. If such a development is to occur, it might hurt the industry and change the whole incentive of offering spread betting options over regular trading.
The Treasury stated the UK government’s need to examine the tax exemption status of spread betting after members of the House of Lords, including the Archbishop of Canterbury, voiced their concerns about extraordinary tax avoidance on trading.
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Lord Eatwell said spread betting “Is a really extraordinary form of tax avoidance within the financial services industry. I think a review of these particular forms of transaction would be very useful, particularly in the light of the fact that the Australian government has now declared that these forms of contract are not exempt from tax and indeed are subject to both income tax and capital gains tax under Australian tax law.”
A senior clergyman and a former member of the Parliamentary Commission on Banking Standards, Justin Welby, said: “It is very much a cultural problem and it is specifically to do with those contracts that are considered to come under the purview of the Gaming Act rather than more generally. It would be useful if the Government were to say that this scope and impact of this is something that should be looked at.”
The Treasury spokesman in the House of Lords said: “I take the point made by Lord Eatwell and Rev Welby about the specific consequences in terms of potential tax avoidance or evasion by people involved in this sector and I can give an undertaking to discuss with my colleagues in the Treasury that specific thing in the context of measures that might be brought forward in a future finance bill. It is, I agree, at first signs a loophole and we ought to have a look at it.”