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Professional status - tax implication?


Hallgente

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Dear IG

 

Recently, prior to log-in, you are inviting me to register as a professional trader.  Presumably this is in view of the actions of the ESMA and their plans to limit binary options and CFD's (Spread Betting next?) and the leverage ratios applied to those products.

 

As a retail spread betting client and with regard to your deep legal, financial and tax professional services pool, can you please advise if there would be any change in my personal tax status if I nominate myself to be a 'professional'.

 

Best wishes

 

Hallgente

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Hi - unfortunately IG can't offer any advice of tax and any information presented here shouldn't be construed as such. At present IG isn't aware of any impact this will have on a clients tax status, as the classification from retail > professional is a regulatory change and it shouldn't impact the underlying nature of the product offered, and therefore shouldn't effect taxation.

 

If, however, you are concerned on this you should seek independent tax advice from a registered tax professional. 

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Hi James

 

1. Thanks for the prompt reply which is disappointing to say the least.

 

2. IG, within its field is a very successful platform operator.  From your cleint base last year, you generated £491,100,000 GBP in revenues with a profit before tax of £213,700,000 GBP.  This is very high profit in the normal course of events compared to the majority of UK businesses.  IG has 185,000 active clients, those who traded at least once during the year.  The 185,000 represents the tip of the iceberg of all the clients that have tried the platform and fallen by the wayside until such time as they get new funds to try out the markets again.  This attrition rate, or churn represents over 95% of people that try their hand at making money out of the markets so over a period of (say) three years, the number of people IG sees going through its books or returning is significantly higher.  To attract this footfall to the IG proposition, IG spends over £60,000,000 a year attracting this pool of people to its products.  However, depsite this relatively large number, IG has a very small core of clients who have 'cracked the code' as such and who make money or stay alive on the markets.  This small core of the 185,000 active clients is a base from whom IG makes a lot of money. For FY2017, IG's net own funds generated from its operations was £183,900,000 with a profit after tax of £169,200,000.

 

3. I am a retail investor. I can claim similar numbers to my name as the IG numbers above save for the decimal point being four places to the left order of magnitude different.

 

4. Of the two of us, one of us should have an incentive to husband the very large revenues and handsome profit levels and help those from whom we make this money get to grips and/or get an opinion from a bona-fide firm of tax specialists, which IG will already have, and spend a tiny proprotion of the figures mentioned above to get an opinion that IG can then share with it's 185,000 clients including the small core of high value clients that generate significant revenues and profits.  It seems very short sighted, perhaps complacent, even arrogant, that IG couldn't carve out a small amount of money from the more than £60,000,000 it spends on marketing for example,  If IG spent even as much as £45,000 on a professional tax opinion, that would be less than £0.25 GBP per client for the whole year and obviously much less than that if ammortised over an even longer period.

 

Best wishes

 

Hallgente

 

 

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Hi - although I appreciate your point, tax advisory isn't part of our business and therefore this wouldn't be something we would offer to the wider client base. This would apply to all tax discussions and queries such as end of tax year questions,  individual tax status, or the implications of any legal or regulatory changes (as above). 

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