A question about tax on CFD income

This is a discussion on A question about tax on CFD income within the Home Trader forums, part of the Trading Career category; I have been trading CFD's since May last year on a fairly limited basis. However, I have come to filing ...

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Old Jul 27, 2004, 8:48pm   #1
 
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A question about tax on CFD income

I have been trading CFD's since May last year on a fairly limited basis. However, I have come to filing my tax return for year 03/04 and although fully aware that any gains and losses in a closed cfd transaction are subject to CGT, there is a question my accountant and I can not find the answer too - not even from our CFD provider! ....

- Does anyone know whether the income from dividend adjustments (ie - that nice wad of cash that is deposited to your cfd account on long positions on ex date), is taxed as income tax, or taxed under CGT? My accountant believes that this cash would sensibly be treated as a capital gain and hence taxed under CGT rules, but there is nothing out there that he can find to verify this...

Would appreciate if anyone had any pearls of wisdom on this....many thanks. (If this income is treated as Capital Gains, could any negative cash flow from a short position at ex date be offset against gains?)

AJ
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Old Jul 27, 2004, 8:53pm   #2
 
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Ask the Inland Revenue - they can be helpful on occasion !

http://www.inlandrevenue.gov.uk

Although, it may feel like asking a vampire how much blood you should donate !!
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Old Jul 27, 2004, 8:57pm   #3
 
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AJ2005 started this thread Asked them and they said ask your cfd provider - case of passing the buck going on...!!
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Old Jul 27, 2004, 9:08pm   #4
 
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Get the IR to put in writing that you have asked them the question, and THEY advised you to ask someone else.

Then, use the method that is most beneficial to YOU.

PS: I should have asked you beforehand if you had asked the IR before posting !!
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Old Jul 27, 2004, 9:26pm   #5
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I have previously been advised that it is not classed as CGT and should be declared as income but to be honest I was never convinced of this.


Paul
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Old Jul 31, 2004, 12:45am   #6
 
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Hi guys, excuse my ignorance....but hopefully you can help me here too. I understand that CGT is applied to the profit (loss) made on the sale of assets. How could CFDs be classed as assets when you do not own a piece of the underlying company?

Have I missed something?

Rock
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Old Jul 31, 2004, 7:12am   #7
 
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Quote:
Originally Posted by rockwallaby
Hi guys, excuse my ignorance....but hopefully you can help me here too. I understand that CGT is applied to the profit (loss) made on the sale of assets. How could CFDs be classed as assets when you do not own a piece of the underlying company?
"CGT is charged on net gains, i.e. total chargeable gains realised during a tax year after deducting total allowable losses realised in the year."
http://www.netaccountants.com/capgain.html

"When taking out a CFD you do not have to pay the full value of the shares - called trading on margin. Typically you will pay between 10% and 25% of their actual value. You do not pay no stamp duty*, unlike with share purchases, because you never actually own the shares. But you do pay capital gains tax* on any profits as you do with normal share-buying. "
http://www.thisismoney.com/undated/si57987.html
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Old Jul 31, 2004, 9:39am   #8
 
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Originally Posted by GirlPower
" You do not pay no stamp duty*, "
http://www.thisismoney.com/undated/si57987.html
Great grammar from Associated Newspapers.
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