Licensing and Taxation of Professional Punters on the exchanges

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Aragorn

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Folks,

I'm sure we have some pro-punters lurking on here and I am finding it difficult to wade through the legislation and get some answers on this topic so I have a few questions relating primarily to taxation of gambling income.

1. At what point (If any) does a punter who lays/bets on exchanges have to pay income tax and declare himself as a pro-punter?

2. What are the licensing/registration requirements of these activities? Is there a threshold at which you have to register as a bookmaker if you are making a living laying horses on the exchanges?

All help and information would be appreciated.

Nick
 
Might be worth a look: http://www.gamblingcommission.gov.uk, e-mail is info@gamblingcommission.gov.uk and they have a number of FAQs which might answer you, Aragorn. You could bung off your Q's to them if they're not listed. I looked at the National Joint Pitch Council stuff for you, but it's largely concerned with on-course bookies' meetings and guff. If your Q's aren't answered by the next meeting at Brighton, I'll ask the NJPC ring manager for you - although if you're going racing in the next week, ask the racecourse office where the NJPC office is, and the ring manager in it will help you out.

However, I'm sure there are enough folks on here who would know, through their own work in the betting industry.
 
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I think as far as income tax is concerned it's quite simply how you describe your occupation. If you say you are a professional punter then the tax man will want full accounts of profit over the year.
I have my doubts about the existence of these so-called professional punters, I think they are up there with dragons, hobgoblins etc. There are people who make a living by writing books about racing and spend a lot of time on track and may even make a profit betting, but I doubt it is their main income.
 
Given there is no tax on betting, you are not obliged to pay tax on winnings, but at the same time you can't declare losses. Like Walsworth says, most earn their betting money from tele or radio stints, book sales and E-Book creations, of which they pay tax on those sales.
 
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I know plenty of the good old fashioned ones who not only don't earn money from stints on TV or the likes, they eschew most types of publicity in any form.
 
There is mention on the site of a threshold of 275,000 before somebody will be considered a non recreational layer. I wanted to establish what this threshold is made up of - I'm assuming it is turnover - and also what are the implications from a regulatory perspective for someone who becomes non-recreational?

There must be people on here who trade at or above that kind of level (Or maybe there aren't) but if those people have been through this process I would appreciate any info to get me started.

If not I will have to review the regulations and statute myself!

PS - I am only talking about the laying of horses on exchanges (I am not interested in getting my own on course pitch).
 
Theoretically you may have to apply for a bookmakers licence for laying above a certain level but I don't think it is something which is adhered to. I know people whose threshold would be over that mentioned but don't hold a bookmakers licence. I don't think it is something which you especially have to worry about.
 
Shadow Leader said:
Theoretically you may have to apply for a bookmakers licence for laying above a certain level but I don't think it is something which is adhered to. I know people whose threshold would be over that mentioned but don't hold a bookmakers licence. I don't think it is something which you especially have to worry about.
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It would be if Betfair disclosed it to the taxman and I was liable!!! Although I think the necessity to have a license seems unlikely i'm mostly concerned about financial implications.

20k a year tax free is a reasonable income. 20k a year taxed is not.. I'm not saying that is what I am making but it is definitely possible if you have the capital and turnover. If you only make 3% on turnover however the taxation threshold (If there is one) becomes very important.

Stan, that is something else that was mentioned on some other forums, whether or not that removes the need to disclose the income i'm not sure. The regulations and guidance on the whole subject are as clear as mud but I would like to be clear about it.
 
Aragorn said:
There is mention on the site of a threshold of 275,000 before somebody will be considered a non recreational layer. I wanted to establish what this threshold is made up of - I'm assuming it is turnover - and also what are the implications from a regulatory perspective for someone who becomes non-recreational?
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What site describes this threshold? There is no threshold in existence (in the UK at least) that defines what constitutes a professional gambler/someone betting "in business". As for placing lay bets on an exchange, there is nothing in law that makes this any different to placing back bets. The only relevant comment from Govt on this I am aware of is the DCMS statement from 2003, which in response to bookmaker lobbying, said that introducing distinctions between backing and laying "would introduce unwise regulatory loopholes".

The concept of a "non-recreational layer" may exist in the mind of Barry Dennis, but it doesn't under any law.
 
Hi Homer,

I had my facts slightly wrong - The threshold I am referring to is Gambling yield:

http://www.gamblingcommission.gov.uk/gf-faqs/betting/how_do_i_calculate_my_annual_g.aspx

If you exceed this threshold you would need to have a license I believe. Now I understand what that threshold constitutes it is not something I would need to worry about unless you were making a lot of money.

I cannot find any comment anywhere as to whether laying horses has the same tax implications as betting, which is tax free. I assume from your comments then that the government have not made any distinction, which is good to know! I would assume it applies to arbitrage on sports exchanges as well then, which is also good!

Thanks for all the comments.

Nick
 
Aragorn said:
Hi Homer,

I had my facts slightly wrong - The threshold I am referring to is Gambling yield:

http://www.gamblingcommission.gov.uk/gf-faqs/betting/how_do_i_calculate_my_annual_g.aspx

If you exceed this threshold you would need to have a license I believe.
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Nick, that threshold applies to persons/operators who already need to be licensed - because they are providing facilities for gambling.

The threshold doesn't of itself define who needs to be licensed. It not relevant to a professional gambler.

The position is always subject to change, but to my knowledge, no professional gambler (whether using exchanges, bookies, spread firms, whether backing, laying, buying, selling) has ever been subject to tax and licensing in the UK, irrespective of betting volume/profitability.

To be clear, there is nothing singling out laying on an exchange (or selling with a spread firm) that makes it any more taxable or any more subject to licensing, than backing on an exchange (or with a bookie).
 
Hi Homer,

Thanks for the clarification. I have spent several hours researching this and there is certainly no separate definition that I can find between betting/laying so tax free earnings it is!
 
There are plenty of people out there who make six-figures a year and do nothing but punt. Most of these are under-the-radar types who you won't have heard of except by their Betfair forum names (e.g. Shaun Goater - he goes to the same betting exchange as me and was bemoaning the introduction of the premium charge last year, as the £600k+ he had earned in the preceding 60 weeks would be down to £500k under the new regime - be nice to change places wouldn't it?).

One guy I know spent a few grand on a barrister to check out the tax situation. There's a precedent - goes back to about 1929 I think - where the judge ruled that if gambling winnings were taxable, gambling losses would be tax deducatable. The only grey area is 'greening up' - i.e. locking in a profit, as this could potentially be deemed as income.
 
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Mounty said:
One guy I know spent a few grand on a barrister to check out the tax situation. There's a precedent - goes back to about 1929 I think - where the judge ruled that if gambling winnings were taxable, gambling losses would be tax deducatable.
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Graham v Green is the case, from 1925. If you google it you will find out more.
 
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Mounty, any idea where they make most of their money? In play trading, swing trading, scalping? Or just plain backing, seems unlikely and I dno't think there is the liquidity on a daily basis to make that money playing the markets pre race to make that kind of money just from that one activity.

Throw in bookmaking as well..
 
In play trading only - the guy who paid for the barrister only backs and 'the goat' is purely a layer. I tend to swing both ways :)
 
Without multi screens, super fast connections and some large gonads I wouldn't want to play in play only... I only have one of the above!

Fair play to him if he can make that kind of money laying in play...
 
Having spent a fair bit of time on this now I have concluded a few things about trading/betting on the exchanges and thought I would share them.

Horse racing in play should only be entertained if you have the right trading software, a super fast connection and access to live feeds. ATR is about 15 seconds behind the live pictures. Being an experienced race reader also helps as does understanding horses running styles prior to the off.

Scalping/Swing trading on horse racing pre race is a difficult market. It is possible to take small profits out of each race by scalping however some markets, particularly lower liquidity markets, are dangerous animals and are prone to huge price swings. Fine if you have predicted correctly but not if it goes against you. The stock market mantra of cut your losses and let your profits run is very true.

Sports Markets - Horse racing is my first love and to be honest i'll always want to have a punt on the horses but having traded in various markets there is a much bigger profit potential in other in play markets. Football is a good example. For instance, 3 minutes before full time on wednesday 3-0 correct score was trading at 1.37. England had just hit the post but were playing keep ball and the game was over for intents and purposes. So i placed a £300 bet at 1.37 and at 91 minutes layed that off at 1.04 and greened up securing a profit of over £60 with a minute to go. I could have held out but I thought the profit was sufficient. Similarly Snooker offers a good opportunity as well because the game is fairly slow moving and generally the best player wins. The higgins/o'sullivan match was particularly profitable because of the see-saw nature of it. After O'Sullivan won the first frame his price contracted further but clearly Higgins is a class player and would fight back. I made good money trading both. Darts is another sport in which similar principles can be applied along with Tennis (Back favourites when they are not serving, any break or potential break will see the price contract).

I can see that it would be possible to make good money if you have a sound strategy, stick to it and have a reasonable understanding of the sport and the markets. 500k a year would involve risking large sums of money on a daily basis but if you have the cahuna's, the money and the techniology it is defnitely possible.

If anyone is interested in trying their hand there is a trading software company offering free or cheap trials of the software. I won't name them for fear of being harangued for promoting it!!

This is probably straying into an "other sports" topic but I think it is an interesting topic for all punters.

Nick
 
I'll give you an example:

Price on a horse looks like it is coming in so: You back the horse with £100 at 1.99, the horse then comes into 1.97 and you lay the horse at that price with £100. By doing that you have made 2 ticks (A price point basically) profit because the profit on your back bet is greater than the liability on the lay bet - £2 because betting at £100 at those prices is equivalent to a £1 tick size. So if the horse wins you get £2, if it loses you lose nothing. Scalping is basically taking money out of the market on small price movements. You limit your risk by locking in profit quickly. Trading software will also offer you the ability to "green up". What this means is it will place bets in the market which will spread that guaranteed profit across all horses. Don't ask me how that works but it does!!! Search for scalping on youtube and you will find some video's on it.

Swing trading is where you back a horse at 5.0 but expect it to backed an so put a lay order in at 3.5 - If you get match on both bets you will lock in a bigger profit. Obviously this does not always work and is more difficult to execute but more profitable. Trading software will also allow you to put stop losses or trailing stops in which will automatically close your position for you if the price goes the other way.
 
Thanks for the explanation.

Starting of at a 5% commission on winnings would seriously complicate things? In the example above you would end up losing three quid, I think?
 
"USA Hawth (US) 15th Oct / 23:12 R9 1m Mdn Claim Comm Charged 4.97% On Net winnings of GBP12.08" This is taken from my account statement after trading on a market. You only pay on net winnings so you're not taking the 5% hit on the win bet return otherwise it would be a futile exercise indeed. My account balance definitely rises (And falls)!!
 
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