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Tax and forex/MLM

Some people are claiming to earn substantial sums from these structures

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Hi - so I'm sure you've all heard of these companies which claim to trade participants' smallish/large sums of money on the forex and pay out each week on the gains. Always gains. Never losses. Smell a rat. 
Anyway, you can also "introduce" someone below you and you get a portion of their investment. So an individual can obtain income from two streams/transactions: their own weekly forex growth % (based on the "pack" they are on, and a cut of sums invested by their underlings. And as an underling themself brings someone below them, you get a bump up from what they brought in and so on.

One then "lives off" their weekly growth but rolls capital in again to get into an higher rate pack. 
 

The "leaders" use social media to actively draw people in so it isn't fully passive income - there is effort in increasing your family tree and earning kickbacks from their investments. There is income to live on. There is capital to reinvest. Gains are made in USD and transferred to a "fob" via Bitcoin and then to one's own personal account.

Many worms in this can but is it all outside tax? The forex trading gains and the income earned from "bringing" people in?

I'm very interested in the community's thoughts on the tax. 
As far as I know, investors are advised that the taxation is subject to applicable jurisdictional law. The tentacles of this thing reach all corners of the globe. 
 

 

 

Replies (26)

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By David Ex
01st May 2022 12:19

I think the sensible thing to do would be to avoid and then you keep your “investment” and don’t have to worry about the tax treatment.

What’s your interest in this? You weren’t thinking of getting involved, were you?

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Replying to David Ex:
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By imbs
01st May 2022 12:27

Absolutely and positively not - it reeks!
Although I hate to admit - a good friend of mine is really quite high up in this thing - she’s loads below her in the family tree. She has tried to get me in and I’ve refused obviously, advising her if the iffy-ness of it all. But now she has brought a client of mine onboard.
My friend is able to draw £1500 per week and currently has $100k capital in it. It eats me up! Surely this thing will collapse but nevertheless I’m keen to get below the skin of the tax of it all, legalities/illegalities aside. As I said, money reaches one’s bank via $USD, then bitcoin then £ via a fob you put into your laptop, not traced an email address or bank account. This is rotten to the core, all under the pretence of forex trade success.

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Replying to imbs:
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By WhichTyler
01st May 2022 16:50

No they are being repaid some of the $100k they have 'invested'.

I'm intrigued how the 'fob' transfers money to your UK bank account... Where does her bank say the transfer has come from? Is it from the bank account of a BTC exchange?

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By nrw2
01st May 2022 12:49

Charles Ponzi would be in awe of this.

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Replying to nrw2:
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By imbs
01st May 2022 13:00

Yes he really would be.

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ALISK
By atleastisoundknowledgable...
01st May 2022 12:59

Partial capital disposals at nil gain, so the capital loss is small(er) when the pyramid collapses?

BTW, does your client know it’s a friend of yours above them?

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Replying to atleastisoundknowledgable...:
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By imbs
01st May 2022 13:08

Yeah I was thinking those sort of lines re the capital growth through higher level packs. The income which derives from apparent forex gains and kickbacks from underlings…thoughts on those? Investment income below £5k per annum 0% like bank interest?

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Replying to atleastisoundknowledgable...:
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By imbs
01st May 2022 13:09

Oh no, I’ve kept my knowledge of the individual under wraps

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Replying to atleastisoundknowledgable...:
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By Hugo Fair
01st May 2022 13:10

... and did your friend know the latest recruit is a client of yours (or, worse, target them as one of your clients)?

Alisk's question and this are the key questions for you. Whether it's all above board (doubtful) and the correct tax treatment are 'fun' issues to deliberate ... but the impact on your professional reputation could be major & negative when the pyramid crumbles (which it will)!

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Replying to Hugo Fair:
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By imbs
01st May 2022 13:27

I’m personally not involved apart from being a friend of the individual - I don’t think it’s right to “fall out” with her because of something she is doing and I am not. As for clients, I have told this client that in my opinion the whole thing is bound to collapse - and that he should get his money out asap. But here’s the thing…he has been waiting 7 weeks to get a small capital sum out and still waiting. Oh and you have to pay 20% of what you withdraw.
I’m not interested, I’m not putting myself out there on social media as a supporter, my name is nowhere near it. I have given my best most sincere advice to client that is it rotten to the core. I will say same to anyone who asks me. But I worry about the taxation of it all esp my client and his revenue withdrawals, and potentially capital gains if this thing lives long enough for him to get any.

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Replying to imbs:
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By David Ex
01st May 2022 17:32

imbs wrote:

I’m personally not involved apart from being a friend of the individual - I don’t think it’s right to “fall out” with her because of something she is doing and I am not.

As for clients, I have told this client that in my opinion the whole thing is bound to collapse - and that he should get his money out asap.

You say that it’s “bound to collapse”. Do you believe it’s a genuine business - just a bad idea - or something potentially fraudulent?

If one of my friends was encouraging people to put money into something I thought was “bound to collapse”, I think I might consider whether that was the kind of person I wanted for a friend.

It would be interesting to see David Winch’s opinion whether you might have a suspicious activity reporting obligation.

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Replying to David Ex:
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By imbs
01st May 2022 17:54

I honestly don’t know if it’s legit or not but I suspect, after doing some due diligence, that the returns are basically cash from fresh blood rather than recurrent unwavering success in the forex market trading. My opinion is that it’s too good to be true and ongoing gains make the crux of the investment unbelievable.
The particular company I know of is being investigated by FCA for regulation breaches.

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Replying to imbs:
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By David Ex
01st May 2022 18:28

imbs wrote:

The particular company I know of is being investigated by FCA for regulation breaches.

The one your friend is involved with?

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Replying to imbs:
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By WhichTyler
01st May 2022 18:41

imbs wrote:

he has been waiting 7 weeks to get a small capital sum out and still waiting. Oh and you have to pay 20% of what you withdraw.

How long before we have the follow up question of 'my client has been scammed by a s0-called investment scheme; is this a capital loss or offset against taxable income?'

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Replying to WhichTyler:
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By imbs
02nd May 2022 09:27

I think this answers my question!

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By SXGuy
02nd May 2022 06:53

I know someone who is doing this also and most likely heard about it from social media.

He's put in about 25k so far and gets a return each week. I was tempted to tell him he's most likely just getting his capital back and will lose out at some point but I didn't have the heart.

I think anything which promotes quick gains should be viewed with caution.

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Replying to SXGuy:
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By imbs
02nd May 2022 09:26

It’s like a cult, they really believe it is the best thing ever and everyone else who doubts/doesn’t invest is foolish.

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By cohen
03rd May 2022 13:27

I've had a potential client come in with a similar 'investment' - https://tbbob.com/scams/brutal-scam-cash-forex-group-review

They are just dressed-up pyramid schemes, but there is no telling some people.

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Replying to cohen:
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By Hugo Fair
03rd May 2022 15:26

The comments section for that linked post is truly terrifying.
No idea which would be worse ... but EITHER the majority of responses are 'fake comments' (posted by promoters of the Ponzi scheme), OR the supply of mentally challenged 'investors' is unlikely ever to be exhausted.

".. there is no telling some people" is possibly the understatement of the year!

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Replying to Hugo Fair:
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By imbs
03rd May 2022 16:55

The ones in it are sooooo devoted and will not hear a bad word said.

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By Hometing
03rd May 2022 14:53

Smells suspiciously pyramid-dy

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Replying to Hometing:
paddle steamer
By DJKL
03rd May 2022 16:02
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Replying to Hometing:
paddle steamer
By DJKL
03rd May 2022 16:40
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By penelope pitstop
04th May 2022 14:15

"Some people are claiming to earn substantial sums from these structures"

And yet those who lose tons of brass doing this sort of thing merely slink off into a lonely dark corner, sulking, without so much as one little peep!

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Replying to penelope pitstop:
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By Hugo Fair
04th May 2022 14:43

Brings an interesting dimension to that old phrase ...

... what's mine is yours (if there are losses) and what's your is mine (for any profits).

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Replying to penelope pitstop:
paddle steamer
By DJKL
04th May 2022 14:47

All investing (if that is what this can even be called, which I am not convinced it can) exhibits the pattern of people remembering their winners and blanking out their losers- you often spot the same characteristic with those that have a flutter, my daughter places small bets on football, she is sometimes very good, a £1 becoming £50 on occasion , she remembers these bets but not the six match failed accumulator let down by Morecambe.

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