Getting charged excessive 25% tax on dividend on Spreadbet on Plus500

[Guest aakash30]

Hi,

 

I have a long spreadbet position on Plus500. The stock went Ex-div on the 22nd of Feb and I was charged a 25% tax on the dividend. If I was long the underlying I would have been charged an effective 15% tax rate which is what IG would be paying if they were hedging with the underlying.

 

Charging me 25% seems to be a way for IG to make free money of 10% on the dividend.

Edit: I also called IG 3 times before the ex-date to try to figure out how much tax I will be charged and the customer support each time gave me incorrect information and said I would be charged no tax as I have a spread bet account. 

 

I wonder if anyone has run into this issue before or if someone from IG can look into this for me.

 

 

 

[Guest PandaFace]

Spread betting is tax free, but divs are paid / received at points value x size.

[Guest PandaFace]

...I think

[Guest aakash30]

Yes agreed but the amount of dividend paid out is in IG's hands and in this case they took a 25% haircut on the dividend (to account for the tax) when however the appropriate tax rate is 15%

[JamesIG]

Hi  - thanks for your query. 

 

Plus 500 are actually incorporated in Israel, and as such they have a 25% tax on dividends which is processed at source. Further to this the div is paid in USD (despite the stock being quoted in GBP) so there needs to be a conversion applied of GBPUSD. This is then simply passed on in it's entirety directly to clients, however as you stated spreadbetting and the profits on those bets are tax free in regards to CGT. 

 

I hope this clarifies things. 

[Guest aakash30]

Thanks for your response. I agree the Israel tax at source is 25% however if I held the underlying I could apply for a 10% discount due to the UK Israel tax treaty. I am sure IG would be doing the same with any of the underlying of Plus500 they hold as a hedge and I would have done the same if I held the underlying to give me an effective tax rate of 15%. 

 

Having the exposure through the Spreadbet locks me into a worst case scenario of paying 25%. Also it didn't help that when I called IG to clarify this point multiple times, there was no mention of the 25%.