Taxation treatment when trading within a UK Limited company

[awoodj]

I work for a computer software company, we have some cash reserves and would like to put this to use in the markets trading, most likely stocks and shares.

Does anyone know the tax implications of this on the following

If using traditional shares are we liable for Capital Gains tax and then Corporation tax on top?

If we trade using Spread Betting instead does this remove the Capital Gains part (assuming it applies)

What costs such as data feeds etc are allowable expenses?

Are losses offset against corporate profits, i.e. if we are liable to pay corporation tax and make a loss on the trading element is the tax man effectively underwriting 30% of the loss as we no longer have to pay tax on the amount lost?

I intend to take proper tax advice on the above but just thought I would try and get a feel for it beforehand.

Thanks for any input.

 

[scose-no-doubt]

capital gains for companies is the same as main rate of taxation

spread betting is tax free but probably wouldn't be if traded through ltd

data feeds would be allowable in ltd and would through sole trading if you assessed yourself under income tax.

hat losses stuff doesn't make any sense. How could you have losses and profits at the same time. losses are offset against profits.

 

[awoodj]

Hi there

Thanks for getting back to me, I think you misunderstood the losses side. I work for a company which is in the computer software business and is profitable, therefore we are laiable to pay corporation tax each year. The question was if we also start trading under the same company and make a loss on the trading can it be offset against the profit from other operations?

On the capital gains tax I was basically asking do you get double taxed, i.e. pay capital gains tax and then any remaining profits are still taken into consideration when calculating Corporation tax liability.

 

[top trader]

why not ask your own accountant ?

 

[scose-no-doubt]

yes it is possible to offset the losses if trading through an ltd dependant on how you classify your principle activities. Might get a little legal but should be no problem if you stay smallfry-ish in the scheme of things.
If HMRC contested you could always start up a holding company and offset your losses through a group tax structure which is the more legitimate and way and can give you a stronger case but thats getting more complex and can sometimes have a real adverse affect on your operations from a tax perspective (in terms of crossing the upper bound) so that would need to be addressed from a cost/benefit perspective.
Go speak to your accountant.

 

[olionion]

This has some good general info:

http://www.contractorcalculator.co.uk/contracting_invest_via_contractor_limited_company.aspx

Be wary of becoming a closed investment company and attracting higher rate corp tax and also implications when shutting down the company on how much tax relief you may or may not get.

Ive just been going through the same thing with my accountant and have agreed on an approach but as everyones situation is different you need to take professional advice otherwise it could cost you more in the long run.

 

[olionion]

as an aside my accountant thinks im a bit of a d*ck head for speculating with company money :clover: :innocent:

 

[scose-no-doubt]

As a note... the group structure would always allow for ER on disposal, there would never be any problem with shifting retained earnings or other funds between companies in the group and anything extracted by owners would be classed and taxed as dividends, probably the most favourable @ 19% effective rate after april.

 

[scose-no-doubt]

as an aside my accountant thinks im a bit of a d*ck head for speculating with company money :clover: :innocent:

IMO accountants are risk averse by nature. That's why I have trouble trading. Would you continue to pay for his services if he was nudging you towards trading?

 

[olionion]

IMO accountants are risk averse by nature. That's why I have trouble trading. Would you continue to pay for his services if he was nudging you towards trading?

very good point lol, i would be a bit worried if he advised it, i think he now copies and pastes his caveats on every email he sends when we discuss it

 

[awoodj]

as an aside my accountant thinks im a bit of a d*ck head for speculating with company money :clover: :innocent:

Well i am not sure that having any significant amount of money sitting getting 1% at best while inflations hits 4% is smart either. Even an accountant can probably tell that you are actually losing money in real terms by doing this.

 

[awoodj]

Thanks for all your input, it sound like it is feasible with the right structure and I will speak to our accountant in a week or two when he comes in to get details.

One last thing though, if you are already doing this is there any difference in tax treatment of Spread betting compared to traditional share trading when working within a Limited Comapny structure? (excluding the Stamp duty side of things)

 

[robster970]

Is short term trading of futures subject to capital gains in the UK?

 

[olionion]

Thanks for all your input, it sound like it is feasible with the right structure and I will speak to our accountant in a week or two when he comes in to get details.

One last thing though, if you are already doing this is there any difference in tax treatment of Spread betting compared to traditional share trading when working within a Limited Comapny structure? (excluding the Stamp duty side of things)

Im not sure you would be able to open a spread betting account through a LTD company tbh, the ones i looked at just seemed to be for retail traders.

 

[scose-no-doubt]

depends on hmrc's view robster. It could be classed as a trade and be taxed under IT.