UK tax reporting when daytrading US shares with an Interactive Brokers account

[Birdie234]

Hi all,

After studying the US stock markets for a long time, I am considering daytrading US equities (only) from the UK using an account with Interactive Brokers (UK). The account would be funded in dollars and all transactions would be conducted in dollars.

I am interested to know if anyone else is doing this on the forum, and if so would be grateful if they could explain the procedure for year end tax reporting to HMRC. To illustrate this, let's say I conducted 1000 trades between April 6th 2012 and April 5th 2013. Each of the trades would in theory have a different dollar to pound exchange rate, even though no conversion was actually done from dollars back to pounds - everything would be kept as dollars, possibly for many years.

I presume the Interactive Brokers trading statement would need to be included with the tax return but what exchange rates would need to be applied to calculate e.g. the cost of acquisition, proceeds from sales and overall profit/loss for the tax year? Do you need to make a note of the exchange rates at the time of every trade, or every day (or month), or just at the start and the end of the tax year.

Would it involve downloading statements electronically from IB and then manipulating them in Excel or another software package to match trades with exchange rates, or could the spot rates or yearly average exchange rates from here be used: HM Revenue & Customs: Foreign exchange rates: USA

Would the SA106 Foreign section need to be completed or could the details just be entered in sterling on the SA108 Capital Gains section?

I should mention that I am resident and domiciled in the UK and would be completing a W8-BEN form, therefore I do not expect any US tax would be withheld by IB, and I therefore would not be claiming foreign tax credit relief.

Birdie234

 

[veekay304]

Hi all,

After studying the US stock markets for a long time, I am considering daytrading US equities (only) from the UK using an account with Interactive Brokers (UK). The account would be funded in dollars and all transactions would be conducted in dollars.

I am interested to know if anyone else is doing this on the forum, and if so would be grateful if they could explain the procedure for year end tax reporting to HMRC. To illustrate this, let's say I conducted 1000 trades between April 6th 2012 and April 5th 2013. Each of the trades would in theory have a different dollar to pound exchange rate, even though no conversion was actually done from dollars back to pounds - everything would be kept as dollars, possibly for many years.

I presume the Interactive Brokers trading statement would need to be included with the tax return but what exchange rates would need to be applied to calculate e.g. the cost of acquisition, proceeds from sales and overall profit/loss for the tax year? Do you need to make a note of the exchange rates at the time of every trade, or every day (or month), or just at the start and the end of the tax year.

Would it involve downloading statements electronically from IB and then manipulating them in Excel or another software package to match trades with exchange rates, or could the spot rates or yearly average exchange rates from here be used: HM Revenue & Customs: Foreign exchange rates: USA

Would the SA106 Foreign section need to be completed or could the details just be entered in sterling on the SA108 Capital Gains section?

I should mention that I am resident and domiciled in the UK and would be completing a W8-BEN form, therefore I do not expect any US tax would be withheld by IB, and I therefore would not be claiming foreign tax credit relief.

Birdie234

Hi Birdie234,

I am also planning to do the same as you have done previous year.. I can't see any reply for your post. You might have already done 1 year tax return and I am sure will be in a better position to advise novice people like me..

Please help

VK

 

[andyjeffrey]

Hey there,

I'm in the same situation myself now, trying to do my tax return for 2012-13. Did either of you get any help/responses on this, or how did you go about completing the previous years returns?

Would be great to see some follow up messages on this thread!

Many Thanks,
Andy

 

[random12345]

Hi all,

After studying the US stock markets for a long time, I am considering daytrading US equities (only) from the UK using an account with Interactive Brokers (UK). The account would be funded in dollars and all transactions would be conducted in dollars.

I am interested to know if anyone else is doing this on the forum, and if so would be grateful if they could explain the procedure for year end tax reporting to HMRC. To illustrate this, let's say I conducted 1000 trades between April 6th 2012 and April 5th 2013. Each of the trades would in theory have a different dollar to pound exchange rate, even though no conversion was actually done from dollars back to pounds - everything would be kept as dollars, possibly for many years.

I presume the Interactive Brokers trading statement would need to be included with the tax return but what exchange rates would need to be applied to calculate e.g. the cost of acquisition, proceeds from sales and overall profit/loss for the tax year? Do you need to make a note of the exchange rates at the time of every trade, or every day (or month), or just at the start and the end of the tax year.

Would it involve downloading statements electronically from IB and then manipulating them in Excel or another software package to match trades with exchange rates, or could the spot rates or yearly average exchange rates from here be used: HM Revenue & Customs: Foreign exchange rates: USA

Would the SA106 Foreign section need to be completed or could the details just be entered in sterling on the SA108 Capital Gains section?

I should mention that I am resident and domiciled in the UK and would be completing a W8-BEN form, therefore I do not expect any US tax would be withheld by IB, and I therefore would not be claiming foreign tax credit relief.

Birdie234

Proper necrophilia on this thread, but I just noticed the latest bump so I'll help you out:

- report disposals only if they occur in the tax year for which you are preparing the return.
- when doing so report the purchase pricing using the BoE closing spot rate on the day of purchase to convert it: http://www.bankofengland.co.uk/boeapps/iadb/Rates.asp?Travel=NIxIRx&into=GBP
- also report the proceeds using the closing spot rate on the day of sale.
- Even if you made a gain in dollars, it's possible you made an exchange rate loss especially if you held the stock for a while and that's perfectly acceptable. Vice versa also applies.
- report on your SA108.
- SA106 not required unless you suffered US withholding tax - even if you did you'd need to file a US tax return to get this back, as the UK is not required by the DTA to refund you tax you should not have suffered, for obvious reasons.
- You are supposed to prepare a proper schedule of capital gains/losses and attach it to your electronic submission. I would hugely advise getting proper software, like Taxcalc, to do this for you. It is very cheap.

 

[andyjeffrey]

Thanks for your bump on the thread and your suggestions of how to deal with this.

There is another (much simpler) suggestion made on the following thread, but there seems to be a lot of doubt as to whether this is sufficient or would be accepted by HMRC. Anyone have any comments, or actually tried this simple approach successfully with their return?!...

http://www.trade2win.com/boards/home-trader/7870-end-year-tax-reporting.html

 

[random12345]

Thanks for your bump on the thread and your suggestions of how to deal with this.

There is another (much simpler) suggestion made on the following thread, but there seems to be a lot of doubt as to whether this is sufficient or would be accepted by HMRC. Anyone have any comments, or actually tried this simple approach successfully with their return?!...

http://www.trade2win.com/boards/home-trader/7870-end-year-tax-reporting.html

Andy, don't worry, but at the same time I don't want to get too deeply into this.

Basically put, disposals must be converted at the spot rate on the day of disposal and accordingly the price paid at acquisition date must be converted on the spot rate of that day.

Remember you are trading both the US stock and the foreign currency at the same time - you are dual speculating. You might make a gain on both, a loss on both or a gain on one and a loss on the other. All of this must be reflected in your return to avoid any chance of discovery penalties. Really shouldn't take that long unless you have 1000s - you can download the BoE rates as a CSV. If you really do have 1000s of trades then your biggest worry is whether you're open to income tax at this point.

 

[P4chira]

I agree with Random.

To complicate things further, you also have to remember to apply the share matching rules
as well as the currency conversion.
http://www.hmrc.gov.uk/cgt/shares/find-cost.htm

Unless you've just a few transactions, I'd get some software as suggested. I don't think the Taxcalc software does the share matching or currency conversions as I think you have to calculate the total gain for the year yourself (though please correct me if I'm wrong). Another software you can try (which definitely does do the conversion and matching) is timetotrade: https://timetotrade.eu/cgt_uk.php