End of Year Tax Reporting

peugots

Junior member
49 0
Madasafish,



That contribution has potentially saved me hundreds of hours of work,stress, and fees.



So a big thank you to you old boy. You have lifted my spirits today by providing that key accounting knowledge.



Hapy new year mad.
 

madasafish

Well-known member
470 5
Peugots

Happy New Year to you too:)

PS a little less emphasis on the "old " boy.. I am oldish but dislike being reminded of it.. and as "you are only so old as you fell", I am still 25 in mind ( I wish):_))))))))))))
 

peugots

Junior member
49 0
Sorry mad. I used the term "old boy" in the traditional public school sense of the word. Its a term of "endearment" ex public school boys often used to use with each other. This easily misunderstood phrase has nothing to do with age and in fact I remember having the phrase respectfully first used in reference to myself when I was 25 ie ten years ago !


Your youthful high spreed brain has helped me out tremendously today and that is why I am delighted by the gentlemanly conduct.
 

sidinuk

Established member
624 5
As another accountant I would agree with Madasafish's method of calculating the figures for your return.

Except that the tax year ends on 5 April not the 4th. So you need to calcuate gains/losses from 6 April 02 to 5 April 03.
 

peugots

Junior member
49 0
Thanks very much Sidinuk; I appreciate the confirmation.


Happy New Year
 

frugi

1
1,827 126
A bit off topic I'm afraid, but today I've mostly been digesting a scintillating tax guide, with the aim of deciding whether to trade as a sole trader, limited company or simple private investor. Naturally the pub has other plans for my sorry carcass, but so far I have managed to resist its tempting clutches. :)

My decision will hang in the balance till April, but given the ability to double 'our' CGT allowance by opening an individual account in my obliging lady's name, the third is currently looking by far the most attractive (and blissfully simple) option.

But disregard my lucky postion and imagine you are an individual trading full time with 'just' the c£8k CGT allowance to hand and no other disposals for the year apart from those incurred in the course of your work.

Why would you want to be a certified self-employed trader?

The only advantage to this that I can see is the ability to deduct expenses and capital allowances for PCs etc., but this minor benefit is surely outweighed by the effective c£8k tax free allowance of the 'CGT route', not to mention that the self-employed are liable for NI (at least 8% of profits between c£4.5k and c£30k), and also if one has no other income the CGT rate is marginally kinder than the income tax rate, being (once above personal allowance) 10% for the next £2k or so, then 20% on the rest up to about £30k (unlike the 22% of income tax). And to top it all income tax starts kicking in at a much lower level of earnings than CGT (10% at c£4.5k then 22% at c£6.5k).

If any of you are self employed traders I would love to know why you chose this route above the 'ordinary private investor' route? Perhaps the taxman forced you to, perhaps there are advantages that my clouded head has entirely failed to notice? If it's no imposition I'd be glad to know your reasons.

Anyway I intend to write to the taxman saying what I trade, how often I trade, how much I expect to make etc. and hope that he agrees that the CGT route is best for us both! I may, just this once, ask an accountant to write on my behalf in case Hector suddenly takes a zealous interest in my financial affairs of yesteryear (which are legally pristine but perhaps a little odd and certainly missing some SB profits).

As an aside, for those of us who are indubitably below the CGT allowance (for whom I imagined life was simple) I'd like to point out a paragraph that states that

'from 2003/4 onwards individuals will not have to complete CGT pages if their disposal proceeds do not exceed 4 times the annual exempt limit and their chargeable gains do not exceed their own annual exemption.'

I'm probably the only person not to be aware of that clause, but it surely means that even if one doesn't make a taxable gain in the year, one would still have to fill in a tedious CGT form if disposals exceeded £31600. For a stock day trader this figure is bound to be exceeded quickly. Harsh and quite unecessary IMHO, but all part of running a responsible business I suppose.

However I assume that the 'disposal proceeds' of futures such as ES are simply the profits accrued as opposed to the notional size of the positions, which would make life for the non-CGT payer more rosy. Is this correct? If not it would mean one would only have to trade one ES future (value c£32000 at the mo) to be obliged to fill in a CGT form regardless of profit. Now that would be a pain.

I also hope futures are exempt from the bed and breakfasting rules.

I'll cease waffling and get back to good old Edwin Lefevre - the best book on trading written IMHO. Shame I didn't read it earlier, would have saved me a few quid I reckon.
 
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hampy

Well-known member
276 5
Frugi, I posted a similar thread a couple of months ago and the number of opposing views was amazing, so I delved a bit deeper.
The following came from a friend whose son-in-law is a tax inspector.
CGT is only applicable to something physical which you have owned , made a gain, and subsequently sold.
Therefore from a trading point of view this means only the purchase of shares and not their derivatives.
Trading of ES futures therefore is chargeable to income tax and not CGT.
My own position is that I have a fulltime but shift working job which will allow me to trade ES on average 3 days a week and to keep in touch with the markets on the other 2.
As I pay PAYE @40% I have decided to set up as a sole trader.
The advice I have received is that, as you say, my new computer + laptop, broadband and charting fees are deductable against my PAYE, therefore 40% in my case. In addition any trading losses are treated in the same manner although obviously any gains are straight into the 40% tax bracket.
I have also spoken to the tax office that handles my PAYE and they have confirmed the above although not in writing!
So, thats how I see it. I would be grateful if you could post if you have received differing advice or think I am going about this in the wrong way.
Cheers,
hampy
 

oatman

Senior member
2,879 22
I was just looking at filing online and the Rev show a list of software of which they approve, some free. Has anyone tried and can recommend one please?
 

frugi

1
1,827 126
Thanks for that Hampy. I had a nasty feeling that futures might be treated differently from shares. Nevertheless, as it is obviously in my interest to try and convince the IR that they should tax me under CGT, I will investigate further and try and find someone who disagrees with your friend's son-in-law! Either that or I go back to Nasdaq stocks and suffer the hideous form filling. The number of tax inspectors who disagree or simply don't know about, say, professional spread betting, gives me hope. I'll let you know what I find out, though it may be a few weeks...

Cheers.
 

MCGF

Well-known member
339 0
Why are u so desperate to pay any tax?
 

frugi

1
1,827 126
For the same reason that I am not desperate to stand outside a police station merrily hawking an array of illegal drugs to weary constables in need of a pick-me-up.
 

GreyingSurfer

Active member
173 0
Frugi,

Thanks for those links. I'd have though that for most of us here the relevant para is no. 8 in the last link:

"Whether or not a taxpayer is trading is a question of fact and degree, to be dermined by reference to all the facts and circumstances of the particular case. However, the Inland Revenue consider that an individual is unlikely to be regarded as trading as a result of purely speculative transactions in futures or options."

If you are 'trading' then it's treated as income, if not it's treated as capital.

Which brings us back to how do we report them for CGT purposes. I have done CGT returns before, but this year will be my first with non sterling futures day trades (past ones have included perhaps a maximum of 10 sterling transactions a year, easy!)

I was intending to follow a route similar to that described by madasafish, and since the sums involved are not going to be great I don't see any likelihood of the IR demanding more info. However, I'm making sure I have all the info needed to provided it should they do so.

Should I have to do so dealing with exchange rate conversions is not going to be as difficult as I suspected when I first thought about this. I can download an annual listing of trades from IB into a spreadsheet and a matching listing of £/euro rates from Oanda. It will be a relatively small amount of work to match the two up manually or even to write a macro that will fill in the approriate exchange rate for each trade.
 

Skimbleshanks

1
2,325 16
If you look on your IB statement you will see that they quote the exchange rate used on the day. It's right at the end. So you can automatically build the exchange rate into your spreadsheet.
 
 
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