Reply to: Can I have Ltd company funds on my sports gambling account? (legit reason)

[GregRickshaw]

Can't add anything useful to the tax opinions and company funds etc., But would be dead keen on seeing the app

[LondonManc]

If the app wins big and you make a 10k profit, at least if it's your personal cash you don't have to worry about paying tax on it. Just a thought.

[d000hg]

It's clear from the OP's question that this isn't the case. Any further comments on these lines will be removed.

FWIW I didn't read the original comment as "are you wanting to gamble company money". I read it as "do you gamble with your own money and want to use the same account to legitimately test the app".

[edison]

Penny testing works fine for FPS etc, not good on Betfair where minimum is £2, and if covering several positions with multiple values above £2 it could be £100 in a few seconds on minimum stakes


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That's partly what I was trying to articulate but not very well...

[edison]

98% of bets are not losers... But yes all gambling has a house edge so if you take the entire pool of gamblers Hmrc would come out owing money.

Tax the house though since they always win and Hmrc makes a killing.

Makes no sense to tax gamblers but they do it in the USA! They get around it by only allowed gambling losses to be deducted from gambling income and not from regular personal income. It's messed up and shouldn't be legal but it is what it is.

I meant 98% of people lose money long term on betting and I was referring mainly to horse racing but it applies in other areas like financial spread betting too. Contracts for Difference (CFD) bettors lose over 80% of the time. One of the main reasons most punters lose money is because they bet on multiple like doubles, trebles, accumulators, 'Lucky 15' etc. This is the biggest profit margin for bookmakers and conversely, most serious punters used to bet only on singles.

Also, certain high profile sports tend to be the ones that are most difficult to make long term returns. Horse racing is one, there's hardly any winning edge available to punters. Football has been going the same way. One of the reasons is that because of the wealth of data, bookmakers make few pricing errors that bettors can exploit. Compare that with minor sports like say athletics where a person making the book (creating the odds) may not be an expert and there is ore scope to find value prices.

I don't know what the figure is today, but in the 1980s and 90s, the 'over round' i.e. the percentage edge UK bookmakers had on horse racing was around typically around low teens up to about 17%. It's extremely difficult to win long term on horse racing although betting tax treatment of bets have changed over the years.

The large majority of long term winning punters on exchanges like Betfair are layers not bettors. I believe the figure there is still in the 90+ percent range.

[jayn200]

Maybe that depends? At various periods in the 1990s and 2000s, I seriously looked at becoming a professional gambler. The taxation rules have changed over the years but it's generally been moving away from the punter towards the bookmaker. HMRC publish guidance on gambling and taxation, it's essentially not a trade. See this link for a broader view and a link to the HMRC Business Income Manual (but check if it's still valid!)

Do I Have To Pay Tax On My Online Gambling Winnings? | BingoPort

As for testing, I've worked on projects to implement commercial payments systems where payments might run into the many thousands or even millions. To test it properly, we used to make actual real payments in the live system but these were nominal amounts, so called 'live penny testing.' Live testing on a betting exchange might be more tricky as liquidity starts becoming affected with larger bet sizes, depending on the market.

I worked in the gambling sector many years ago and I recall a famous test case in the 1950s where HMRC's forerunner wanted to make betting winnings taxable. The defendant was a gambler called Alex Bird who used to bet over £2m p.a (nearly £100m in today's money.) He argued that his losses should also be tax deductible. HMRC lost the case as around 98% of bets are losers which would open the floodgates for the vast number of losing punters.

98% of bets are not losers... But yes all gambling has a house edge so if you take the entire pool of gamblers Hmrc would come out owing money.

Tax the house though since they always win and Hmrc makes a killing.

Makes no sense to tax gamblers but they do it in the USA! They get around it by only allowed gambling losses to be deducted from gambling income and not from regular personal income. It's messed up and shouldn't be legal but it is what it is.

[GhostofTarbera]

Maybe that depends? At various periods in the 1990s and 2000s, I seriously looked at becoming a professional gambler. The taxation rules have changed over the years but it's generally been moving away from the punter towards the bookmaker. HMRC publish guidance on gambling and taxation, it's essentially not a trade. See this link for a broader view and a link to the HMRC Business Income Manual (but check if it's still valid!)

Do I Have To Pay Tax On My Online Gambling Winnings? | BingoPort

As for testing, I've worked on projects to implement commercial payments systems where payments might run into the many thousands or even millions. To test it properly, we used to make actual real payments in the live system but these were nominal amounts, so called 'live penny testing.' Live testing on a betting exchange might be more tricky as liquidity starts becoming affected with larger bet sizes, depending on the market.

I worked in the gambling sector many years ago and I recall a famous test case in the 1950s where HMRC's forerunner wanted to make betting winnings taxable. The defendant was a gambler called Alex Bird who used to bet over £2m p.a (nearly £100m in today's money.) He argued that his losses should also be tax deductible. HMRC lost the case as around 98% of bets are losers which would open the floodgates for the vast number of losing punters.

Penny testing works fine for FPS etc, not good on Betfair where minimum is £2, and if covering several positions with multiple values above £2 it could be £100 in a few seconds on minimum stakes


Sent from my iPhone using Contractor UK Forum

[edison]

One of the problems here is that it is totally implausible to suggest that you are running a business testing a gambling application by actually betting.

HMRC will simply assume you're gambling.

Maybe that depends? At various periods in the 1990s and 2000s, I seriously looked at becoming a professional gambler. The taxation rules have changed over the years but it's generally been moving away from the punter towards the bookmaker. HMRC publish guidance on gambling and taxation, it's essentially not a trade. See this link for a broader view and a link to the HMRC Business Income Manual (but check if it's still valid!)

Do I Have To Pay Tax On My Online Gambling Winnings? | BingoPort

As for testing, I've worked on projects to implement commercial payments systems where payments might run into the many thousands or even millions. To test it properly, we used to make actual real payments in the live system but these were nominal amounts, so called 'live penny testing.' Live testing on a betting exchange might be more tricky as liquidity starts becoming affected with larger bet sizes, depending on the market.

I worked in the gambling sector many years ago and I recall a famous test case in the 1950s where HMRC's forerunner wanted to make betting winnings taxable. The defendant was a gambler called Alex Bird who used to bet over £2m p.a (nearly £100m in today's money.) He argued that his losses should also be tax deductible. HMRC lost the case as around 98% of bets are losers which would open the floodgates for the vast number of losing punters.

[Paralytic]

Ideally yes that's what I'd like to do but this is a one man team and mocking a sports exchange is in itself an enourmous project, it would cost less to lose money testing the app than building such thing. It's something I'd like to do for future projects but for this one is really not worth.

No, it'll have a mechanism of closing some positions you have automatically based on certain criteria.

Sounds interesting, and good luck. If your app is effectively making position decisions for users, I hope you have specialised insurances for if/when you launch. That is a *big* thing to take on as a one man team.

[Fabs]

The accountant has said this is a high risk strategy. Personally, it seems pretty obvious what's going on. The OP's accountant has given their advice, the OP is determined to push on.

Betting companies use a test environment copied from Live and anonymised but it's still a test environment.

I wont be surprised to see another post in about 18 months saying Im under investigation by HMRC, what should I do?

Yeah I've already ruled out the option of using company funds (mentioned above), not worth the trouble. I'm sure they have their own testing sandboxes, but that doesn't mean they let everyone use it - Betfair certainly doesn't, you use their API in "real" mode always, the only difference is you get a delay until you pay for a production API key.

If the 3rd party does not provide a live system, then build mock interfaces/stubs to mimic their interface. If you can't build a stub because you don't understand what their API will return, then I'd suggest you don't know their business well enough to be able to build an app that will be a success.

Ideally yes that's what I'd like to do but this is a one man team and mocking a sports exchange is in itself an enourmous project, it would cost less to lose money testing the app than building such thing. It's something I'd like to do for future projects but for this one is really not worth.

Is your app looking for arbitrage opportunities across betting platforms?

No, it'll have a mechanism of closing some positions you have automatically based on certain criteria.

[Paralytic]

Agree with the above 2 posts. If the 3rd party does not provide a live system, then build mock interfaces/stubs to mimic their interface. If you can't build a stub because you don't understand what their API will return, then I'd suggest you don't know their business well enough to be able to build an app that will be a success.

Is your app looking for arbitrage opportunities across betting platforms?

[BlasterBates]

One of the problems here is that it is totally implausible to suggest that you are running a business testing a gambling application by actually betting.

HMRC will simply assume you're gambling.

[TheDogsNads]

The accountant has said this is a high risk strategy. Personally, it seems pretty obvious what's going on. The OP's accountant has given their advice, the OP is determined to push on.

Betting companies use a test environment copied from Live and anonymised but it's still a test environment.

I wont be surprised to see another post in about 18 months saying Im under investigation by HMRC, what should I do?

[Fabs]

Do what everyone else does

Test users use own personal accounts, claim back as an expense via company

Anyhoo

If just app based it will be way to slow to have any edge in the in-running markets due to the time delay even if attending the event in person surly?


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I wouldn't mind doing that, but what category of expense would that be? And surely would need some proof of that which wouldn't be straightforward to get. I've moved on and considering other options.

Being app-based is less than ideal for strategies that require placing a lot of orders (high-frequency trading) or that are very sensitive to latency and stuff like that, this is not the case for this app. It's only partially automated so the edge would still be dependant on the customer, it's nothing too complex and mainly targets markets that are not that volatile so I think the app will do fine, it's also not it's main feature so not too worried.

[GhostofTarbera]

Sorry if I didn't make this clear, the 5K budget was not to drop into the betting account but to cover all associated costs (hosting, domain, design work, advertisement, trading funds as/when needed too, etc etc).

Betfair doesn't have a test/simulation environment, they do have a pre-prod api key which just delays the market but you'd still be placing bets with real money anyway, the simulation mode is something vendors have to do themselves and it's just too much work (for little benefit on this project) for a one man team.

The placement of orders from my app would be with the minimum amount allowed (the majority at least), otherwise it would simply be stupid - who would drop huge sums of money for an app that's unfinished to play with? Not me for sure.



I'm pretty sure I've asked betfair if they have accounts for companies and they said no, maybe worth asking again but if it smells bad to HMRC I'd rather not risk.

Thanks for the feedback / suggestions

Do what everyone else does

Test users use own personal accounts, claim back as an expense via company

Anyhoo

If just app based it will be way to slow to have any edge in the in-running markets due to the time delay even if attending the event in person surly?


Sent from my iPhone using Contractor UK Forum