day trading and capital gains/losses

spoon102

Member
60 0
There is no tax adavantage to forming a limited company to trade. If the company is classified as an investment company, as it would be if you used it for trading then you would loose the small companies rate of Corporation Tax. i.e. any profits would be subject to tax at 30% (as opposed to rates of 10%, 22% and 40% for individuals).

The question of trading has nothing to do with other income. The Revenue will look at each case individually. They look at things like frequency of trades, profit motive etc. IMO if you are trading every day to derive your income you should be subject to Income Tax and not Capital Gains Tax. (i.e no £7,500 CGT exemption).
 

Splurge

Member
88 3
Nice you have an opinion on it spoon but I think it best if I agree to disagree. You have your sources of information on the best arrangement for trading as do I.

dsmodi /Im50- if you are looking for an accountant who has specialised knowledge in this area and has obtained legal precedence please private me on it. I am not advertising their services on this web site as I will be accused of all sorts.

Otherwise, wait for april and see what transpires in the next money-go-round shake up...................tax on s/b maybe - eeeeeek.
 

JonnyT

Senior member
2,560 22
I can also confirm that there is no tax advantage for an individual trading as a limited company than in his/her own name.

In fact you are likely to be worse off.

You will pay corpation tax on any profits, income tax / NI on any money you withdrawl for day to day living etc.

JonnyT
 

Splurge

Member
88 3
It is interesting the differing views around this subject and obviously, depending on how you trade will determine the best way. I personally find that operating as a limited company is more beneficial to me for the following reasons.
1. I can trade cfds under a company name and sb under my own name and not be subject to tax issues on my sb activities (at the moment, subject to what happens in april)
2. I can offset all my costs, expenses, rent, telephone, car expenses, feeds, Bskyb etc etc etc
3. The company will not be classed as an investment company owing to how I trade and should be subject to small companies rate of corporation tax.
4. At the moment dividends are still an excellent form of profit payment (even tho I expect this to change soon).

I still receive significant income from sb, and it is important for me to be squeeky clean when it comes to making sure they are classed as separate from my cfd/futures activities so operating through a company status is important for me.

I will say again it is all dependent on an individuals circumstances.

If anyone operates in a different manner it would be interesting to know how so we can all learn from their experiences. There are a lot of what u cannot do or is not a good idea posts here. Lets all benefit from other peoples approach or are most people operating outside the parameters of the UK tax system?

Do people find operating as a sole trader beneficial and why?

Do people trade and just make use of their capital gains only?

Do people take the money and run :)
 

JonnyT

Senior member
2,560 22
Hi Splurge,

I would be interested to know how you are avoiding being classed as an investment company?

I would also be interested how your spreadbet profits do not count as income?

Any reply gratefully accepted.

PS I do not work for the Goverment!

Thanks

JonnyT
 

sidinuk

Established member
624 5
A Close Investment Holding Company is one whose main purpose is to hold assets and does not carry on any sort of trade. I would say that actively trading futures/cfds is a trade as futures/cfds do not produce any unearned income such as dividends. Much the same as a grocer buys and sells apples, his trade is apples, ours is futures contracts.

Spreadbet profits are tax free because any winnings are classed as gambling winnings. This is ok for someone who spreadbets on an ad-hoc basis, however someone who effectively spreadbets instead of trading futures for a living could be liable to taxation. I think it is very unlikely that the tax man would actually follow this up though. If spreadbet profits became liable to income tax then any loses would be allowed to be offset against income as well. The tax man might think he's doing well by taxing someone this year on £10k of profits, but what about next year when the same person makes a £50k loss!

I also think that overall more people lose at spreadbetting than win. Let's face it, the majority of spreadbetters are beginners or gamblers. If spreadbet profits were taxable, losses would have to be allowable leading to a net outflow for the Inland Revenue. That's why gambling winnings are tax free in the first place, because more people lose! Have you seen the sort of profits that the spreabet firms make?

The only way for the government to tax spreadbetting is a betting levy on each bet placed, but they abolished that on 6 Oct, 2001!
 

Splurge

Member
88 3
Trading cfds does not qualify as an investment unlike trading shares as you do not own part of a company just a piece of paper/contract. People who believe otherwise are ill informed.

If you trade 1) cfds / futures and also trade 2) sb, you must differentiate between the two. Operating as an individual, sole trader or even a partnership does not do this and the taxman can still zero in on your activities if it is seen that the activities of trading are carried out under the same name. The arguement will be 'what is the difference?'

Trading as a Limited company for cfds/futures, and sb as an individual makes the distinction between the two.

The only 'downside' that I have found is that operating through a company classes you as a professional when trading through NYSE which is approximately an additional $100 per month. This is a small price to pay imo, which is of course tax deductable fwiw.

This is basically the situation. If you require further info I can point you in the right direction if you wish.
 

JonnyT

Senior member
2,560 22
Hi Splurge,

I would certainly like further information.

What is the Tax position then?

I.e taking out money? Corporation Tax rate?, NI? etc

Thanks

JonnyT
 

Splurge

Member
88 3
Jonny pm me for info.

I will confirm with sharky if its ok to give out details of the company on the board for everyone else
 

JonnyT

Senior member
2,560 22
Hi Splurge,

Not sure what pm means but here's hoping it means give an email address!

[email protected]

Thanks

Paul
 

Henry

Active member
177 2
Splurge said:
2. I can offset all my costs, expenses, rent, telephone, car expenses, feeds, Bskyb etc etc etc

There's nothing to stop you doing that as an individual not just as a company, so I wouldn't count that as a particular advantage.

Always produces an interesting debate this subject :)

H.
 

catsdad100

Junior member
33 1
When I first started full time trading, two years ago, my accountant had a discussion with the Inland Revenue. They would not accept that full time trading was a job, and refused to allow me to claim any expenses. As a result my share dealings would only be subject to CGT. I have been spreadbetting for the last year. This is betting, so not subject to tax. I have, all my life, been self employed so pay S/E NI contributions. On the principal that they set I will just carry on with things as they are. I did wonder if I could, on their definitions, claim unemployment benefit !!
 

Splurge

Member
88 3
Sharky will be posting a company to contact that will able to help you verify the issues I have stated that no one seems to believe.

I don't know how many times I have to post the facts about this but I suggest anybody who has doubts about the validity of the information I am giving can contact them personally.

Im bored with this thread now........
 

spoon102

Member
60 0
Splurge, The rules for Investment Companies state that an investment company deals in and derives the majority of it's income from financial instruments. If CFD's are not financial instruments then I dont know what is. Moreover, there has been case law that states that the process of dealing in shares etc does not itself amount to a trade. i.e. the only way it would be a 'commercial trade' would be if if you were dealing in financial instruments for your customers (if you had any!).

The whole point of the legislation was to try and stop people building up money in a company to avoid higher taxes. Obviously, the spirit of the law is designed to stop what you are trying to achieve.

The only reason I'm posting this is as a word of caution. Dont think that just because your accountant has told it is ok then it will be. I'm not too sure that the Revenue will be as easy to convice. Dont forget that if you get this wrong you could have up to 6 years back tax to pay all at once plus interest, plus penalties.
 
 
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