London prop Traders /locals

DSX

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Just a quick one to see if anyone can point me in the right direction. In the process of setting up a ltd company through which I can trade through. Currently at a prop firm that do not offer any accounting services ...Is there anyone that could recommend a decent / understanding accountant which deals with matters like these( and has a good knowledge of futures/options etc and what i can strip out as expenses etc).So far seen one who was poor!(surprise) or if anyone else does the same thing and knows a national one with office in london this would great. Also anyone that works at a firm and trades through a ltd company are you happy this is the best way. I know there are some good threads here but not directly guys/girls at prop firms. Are your employers/clearers happy with this structure ? etc

Any help appreciated ...

Please feel free to PM/email if prefer with accountant recommendations/advice etc

Many thanks,

DSX
 
Yikes.

Same question on 2 web sites, from the same person.

Same answer from the same person on both.

You people must be more sad and bored than I am!
 
What are you saying JohnDoe? Please elaborate for the benefit of others.
 
I trade through a limited company and pay myself via dividends and a small salary. All expenses also go through the company and are offset against the revenue.

I am assured by my accountant that this is preferable to a sole trader type set up.
 
JP,

Your post reminded me that I never replied to your query on another thread regarding sole trader v ltd. co. status. I do not have an accountant but am pretty sure your one is correct, although the gap has narrowed considerably, recently, and there are, at least for me, other factors to consider.

Up until recently small businesses were able to make annual tax savings of up to 4k by operating as a company rather than a sole trader.

Up to Apr 2004 you could pay less tax as a company because (since Apr 2002) small companies paid no corporation tax on the first 10k of profits. Profits between 50k and 300k were taxed at 19% and a system of marginal tax relief smoothed the transition between the 0% and 19% levels for companies with profits between 10k and 50k. As a director/shareholder of your own company you were able to reduce your income tax bill and avoid NI altogether by paying yourself a salary limited to the personal allowance. You then paid yourself the rest of the money in dividends. This was pretty sweet. :)

But, from Apr 2004, in an attempt to level the field between directors of small companies and the sole traders, any money paid out to an individual as dividends is now taxed at a minimum average corp tax rate of 19%. The change has only affected companies with profits of less than 50k - those with larger profits have always paid tax at an average rate of 19% anyway. If you have a smaller company and want to pay yourself a dividend, but pay an average rate of less than 19%, you now have to find money to pay extra corp tax to the taxman, thus cutting the amount of the dividend.

Business with the least profits have to pay the most extra in corp tax, but even so, they still pay less tax overall than they would as sole traders.

However against the tax saving advantages of incorporating, people who are thinking of operating as a company need to consider the drawbacks, which include:

More formal and costly accounting and reporting requirements.
More formal procedures for drawing money from the business
Tougher rules for expenses and fringe benefits

In short, though I might save a little tax by being self-employed (considerably less than before) I am a great fan of simplicity, doing my own accounts and understanding them etc., and the gap has narrowed sufficiently since Apr 2004 to make me unwilling to change tack.

That said when I encounter the box marked "turnover" and "cost of sales" on the dreaded SA103 it's down to me alone to explain in the all too tiny box for additional notes that futures trading does not involve these traditional terms and convince the Revenue as to exactly why, which can be depressing! :) I dread the day when I have to print out 250+ pages of incomprehensible transactions for Hector ... perhaps I need an accountant after all, which would mean that (s)he would cope with all the extra hassle involved with filing company accounts anyway, so it wouldn't be my problem.

PS I am also director of another company and am worried that the Revenue might become suspicious if I added another to the quiver. The last thing I need is an investigation, despite my obvious propriety :) It was enough of a hassle getting them to admit I am self-employed at all so I'd just like to let the dust settle for a while, but I will consider the possibility of trading as a company in the future.

To sum up, you're probably still approaching it in the most tax efficient manner. And then there's the CGT allowance to use as well (as long as you keep your investments miles away from your trading, as it were, or Hector might like to lump them all together as income.
 
Thanks for your response and I agree with what you say. The main point being that up to £300k a company pays tax at a marginal rate of 19% and as you are aware it increases after this level. If the same person operated as a sole trader he would pay 40% on all income. You are substantially better off from a tax perspective just paying a marginal rate of between 0 and 40% on what you transfer out of the company for living expenses and retaining all other profit in the company.

The cost of running a company is pretty tiny in terms of regulatory requirements and fees. I also agree I can retain my CGT allowance for share trades by putting all my usual trading through the company. (As an aside I not sure how beneficial this is in reality as any equity purchases seem to be not very good!)
 
No worries JP. My eyes have been opened by the discussion.

If the same person operated as a sole trader he would pay 40% on all income.

Well, on the proportion of income above approx 31k anyway. Below this level the difference between 19% and 22% basic rate isn't too savage. But then again I'm not making enough to qualify for the 40% rate and you may well be. The more you make the more attractive a company looks, especially above 31k, which ain't lots these days. :)

Re CGT you don't necessarily have to restrict your activities to purchases, but I admit that opening a separate account that allows derivative trading may well raise Hector's income/corporation-tax sniffing hackles more readily than a standard brokerage account! I guess there's always spread-betting, declared as an aside in the notes in 6B pencil and hopefully thus unnoticed. ;)

Sorry, I'm probably preaching to the choir anyway. Guess it beats lifting their robes at least :eek: :LOL: Well it is Friday ... my humour always seems to fall to the gutter soon after 7.00 ... I blame TheBramble. :p
 
You are substantially better off from a tax perspective just paying a marginal rate of between 0 and 40% on what you transfer out of the company for living expenses and retaining all other profit in the company.

So what do you do with the money in the company then? At what point do you pay it out and how unless you are hoping the tax rates will come down?
 
So what do you do with the money in the company then? At what point do you pay it out and how unless you are hoping the tax rates will come down?

1. Get spread betting account with 'discretion' - a few companies will do this for you
2. Make very large trade with spread betting account, do opposite trade with company
2a. Trade wins for company? Use company account to bail out spread bet account, rinse and repeat
2b. Trade wins for spread betting account? Hurry, the money has been transferred tax free, minus spread. Wind up company.

Not that anyone, ever, does anything like this of course...
 
So what do you do with the money in the company then? At what point do you pay it out and how unless you are hoping the tax rates will come down?


To date I pay myself what I need to live etc in dividends and retain the rest in the company.

If I ever wanted to withdraw all the extra profit from the company there there is a slightly more legit way than Arabaian suggests to do this. Close the company down. The tax paid on withdrawing the excess capital/retained profit in this scenario is just 10%. However if you were to set up a second company the day after you would probably be nabbed by the Revenue. Leave a sensible gap first.

Obviously take the advice of an accountant as well not just some anonmymous bod off the net!

Arabian - would your friend do your method every year rather than pay even a dividend over and above the higher rate threshold? Why do you need to close the company down if you adopt your method. Surely if spreadbet makes say £x and company loses its entire profit of £x then there is no need to close it down - it just isnt a profitable company? Also has the revneu never said you cant have tax free spread bets? My accountant has told me if I spread bet FX the revenue would refuse to allow it to be tax exempt as it is my full time job- feel free to PM rather than post here if you feel more comfortable!
 
marwan, what attracts you to headway? the IT on offer? the training?

to me, they just look like another vulture circling around the trading battlefield feeding on the dead and wounded.
 
1. Get spread betting account with 'discretion' - a few companies will do this for you
2. Make very large trade with spread betting account, do opposite trade with company
2a. Trade wins for company? Use company account to bail out spread bet account, rinse and repeat
2b. Trade wins for spread betting account? Hurry, the money has been transferred tax free, minus spread. Wind up company.

Not that anyone, ever, does anything like this of course...

Has anyone actually tried this? I'd be interested to know if people get away with it....If so I might be tempted to try it myself at some future date. (y)
 
Has anyone actually tried this? I'd be interested to know if people get away with it....If so I might be tempted to try it myself at some future date. (y)

DOH! I guess nobody will admit to doing the above anyway. (Don't want the taxman knocking.) :D
 
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