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TonyTax
TonyTax, Tax Consultant
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Im self-employed chef for last 5 years. But meanwhile I was

Resolved Question:

I'm self-employed chef for last 5 years. But meanwhile I was investing in forex and I had loses for last 3 years. is this loses allowable, and if they are can I correct my self assessment for past years?
Submitted: 3 years ago.
Category: Tax
Expert:  TonyTax replied 3 years ago.
Hi.

Were you trading forex through a spread betting account?
Customer: replied 3 years ago.

Yes.

Expert:  TonyTax replied 3 years ago.
Thanks.

Leave this with me while I draft my answer.
Expert:  TonyTax replied 3 years ago.
Hi again.

Profits from gambling which is what spread betting sports, forex, anything is are not taxable in the UK. Conversely, losses made from spread betting are not deductible from other sources of income I'm afraid

Some people will tell you that if income from betting is the main source of income of an individual, that it is taxable. I've been working in tax for nearly 35 years and I have never met a professional gambler (I have met several) who pays tax on his or her actual betting winnings. They do pay tax on income from tipping services but not on actual betting winnings. Take a look here for the HMRC view. If the tax office allowed betting losses to be offset against other sources of income, they would be out of pocket since most gamblers lose money.

I hope this clarifies things for you but let me know if you have any further questions.
Customer: replied 3 years ago.

On the internet site http://www.trading212.com/en/Frequently-asked-questions/6/#heading which I use says that I should pay taxes. And here says that I can, just wanted to make sure http://www.hmrc.gov.uk/manuals/cfmmanual/cfm61010.htm

Expert:  TonyTax replied 3 years ago.
You are trading through a spread betting account against your broker as you might bet on a horse against your local bookmaker, not with the foreign exchange market so your losses are not tax deductible and nor are your profits taxable.

If you traded directly with the foreign exchange market through an ECN account, that could be classed as trading and your profits might be subjected to income tax or capital gains tax. HMRC don't appear to have developed a policy on this yet. I know professional financial traders who disclose profits as capital gains so their tax charge is limited to 28% maximum and as low as 18% and other traders who disclose their profits as income so they can pay get a mortgage or pay pension contributions to keep the income tax charge down.

If the tax office saw your trading as a hobby as opposed to a properly run business, they would probably disallow your losses even if you were trading directly with the foreign exchange market. Take a look here for information on hobby trading.

The link from the HMRC site you gave me is about foreign exchange gains and losses. The profits from exchange transactions, particularly one off transactions, are normally subjected to Capital Gains Tax. You could not offset an exchange loss like that against your income from self-employment.

For example, an individual may buy a house abroad and sell it ten years later for a cash profit in the local currency. If the exchange rate had moved in his favour over the ten years, he will also make an exchange gain which is subject to capital gains tax along with the cash profit on the property. If it had moved against him over the ten years, the exchange loss would dilute the cash profit and the gain on the property disposal itself.
Customer: replied 3 years ago.

Clear enough. Last question can I change my self assessment for past years?

Expert:  TonyTax replied 3 years ago.
You can find information on amending a self-assessment tax return here and the time limits here. If you wish to claim your spread betting losses, by all means try but I doubt you will have any success.
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