By DominicWalsh · Posted
Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 76% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money. Professional clients can lose more than they deposit. All trading involves risk.
The value of shares, ETFs and ETCs bought through a share dealing account, a stocks and shares ISA or a SIPP can fall as well as rise, which could mean getting back less than you originally put in. Past performance is no guarantee of future results.
CFD, share dealing and stocks and shares ISA accounts provided by IG Markets Ltd, spread betting provided by IG Index Ltd. IG is a trading name of IG Markets Ltd (a company registered in England and Wales under number 04008957) and IG Index Ltd (a company registered in England and Wales under number 01190902). Registered address at Cannon Bridge House, 25 Dowgate Hill, London EC4R 2YA. Both IG Markets Ltd (Register number 195355) and IG Index Ltd (Register number 114059) are authorised and regulated by the Financial Conduct Authority.
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I hope someone can explain this to me because I've searched high and low for the answer online and on IG's website and community to no avail. So I emailed the help desk but their reply only confirms what I already know and doesn't explain what I don't.
My confusion arose after I opened a spread bet on a US equity for the first time and was emailed by IG requesting my urgent completion of a W-8BEN form:
"You recently opened a position on a US equity, without being documented with a W-8BEN or W-9 form. This means that your position is subject to withholding of tax of up to 30% on any dividends, along with a potential admin charge of $50.
This is because of new regulations that came into effect on 1 January 2017, under Section 871(m) of the US tax code, which treat ‘dividend-equivalent payments' on US equity derivatives – including spread betting and CFDs – as US-source dividend income. An individual would be subject to 30% withholding tax under normal US rules. However, a US-UK tax treaty exists which entitles a UK tax resident to pay only 15% of the tax.
What do I need to do?
Please complete the correct form as soon as possible to avoid paying unnecessary tax and admin charges. The amount of withholding tax you'll pay on your dividends could reduce from 30% to 15%."
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