Has anyone set up a hedge fund for their trading activities?

[meanreversion]

Not sure which section to put this in, so it's gone in the main one.

I spoke to a lawyer a while back about setting up a fund, it seems the generic cost for a Cayman based outfit is £50k to begin with, alongside a multitude of annual charges and fees (gulp). Is there a cheaper way to do this? Has anyone done this, either by themselves or with someone else?

 

[Xeno]

Apart from dubious tax purposes, what would want from a hedge fund in Cayman that you wouldn't get from a Limited in the UK? Is there a point to a hedge fund with one person's money in it, if that's what you're intending?

 

[meanreversion]

It was a look into a potentially more tax efficient method of trading.

If you set up as a ltd company, what are the tax advantages?

 

[Xeno]

Well you probably just need a limited. It's easier to cover business expenses before tax and the main advantage is you pay yourself a smallish salary (you pay NI plus employers NI) then pay the bulk of profits as dividends - current rates are:

Dividend income at or below the £37,400 basic rate tax limit 10%
Dividend income at or below the £150,000 higher rate tax limit 32.5%
Dividend income above the higher rate tax limit 42.5%

 

[meanreversion]

Is this what you've done?

What about money that you leave in your account and don't draw, does that not then attract corporation tax?

 

[Xeno]

I haven't done it yet, but I will do, and I've run plenty of companies before.

Money which is actually revenue and profit in a particular year has corp tax paid on it for that year. You can leave it in and draw it out as salary or dividends another year but you will pay personal tax then - of course you will also reduce your profit and therefore corp tax for that other year, so you're not exactly paying tax twice. I think it makes sense to draw most out and keep corp tax down. Mind you I'm not an accountant - they'd be able to give you the best advice (there's also probably plenty on the web - in fact a lot of accountants produce guides)

cheers

 

[meanreversion]

Yes, I'll need to chat to mine. I think the "Con-dem" coalition is about to reduce corporation tax, not sure if that makes a difference.. professional advice probably the best bet.

Thanks for your input.

 

[robster970]

The maximum amout of dividends that you can take is based upon your net profit after capital gains and corporation tax has been applied for the financial year in question.

If you have accrued profits from previous years, you can still pay this as additional dividends in subsequent years.

Talk to a good accountant, it's all fairly straight-forward.

 

[meanreversion]

None of this is very compelling. I suppose 30 ish percent is better than mid 40's tho. Maybe time to look at Prospreads.

 

[Hoggums]

Speak to wasp. I hear he's done this sort of thing before.

 

[MrGecko]

I dont think hedging your net worth against potential future tax bills counts.

 

[Adamus]

You could move to the Caymans.

Have you browsed here: http://www.traderstaxclub.co.uk/

 

[meanreversion]

Interesting link, thanks, will take a look.

 

[Chartsy]

isn't rothschild planning for a hedge fund? maybe you could ask him

 

[advfntrader]

must be a lot of traders on here raking it in it seems....

 

[meanreversion]

Just looking for angles on making things efficient, that's all. I'll speak to my accountant and let you know what I hear (but will probably all change on June 22nd anyway, budget day).