US to UK - Tax Issues

[j0hn]

Hi,

New to the board. Tried searching for similar topics but 'UK' was considered too small! 🙄

I've recently started trading US stocks from the UK with a US trade account, and im just trying to clarify my tax situation. I had to sign the W8-BEN form when opening the account, so I assume im exempt from US tax? At what point does the UK start taxing me? I've noticed a lot of people are from the UK here so I guess there are quite a number of people here who are in the same situation.

Thanks in advance.

 

[Salty Gibbon]

Depends largely whether or not it is your main source of income and whether you will be paying income tax or capital gains tax.

Go to the Inland Revenue website to look at tax scales for Income Tax and CGT.

You could also consider going to see an accountant.

I am actually one myself but my knowledge of UK tax is small because I spent my entire professional life overseas.

 

[osho67]

IB charges me 15% withholding tax on dividends received on US shares.

 

[j0hn]

Thanks for the reply Salty.

I've had a look around the the Inland Revenue site and found some useful information regarding rates etc. Do you know if the money has to leave my US account and enter my UK account for it to be eligble for tax?

And if that's the case, I take it I have to declare this myself?

Thanks again

 

[Salty Gibbon]

I believe that even if it is in your US account you still need to declare it for tax purposes.

Your worldwide income is subject to UK income tax if you are ordinarily resident in the UK I believe.

An hour with a tax accountant would probably be a good idea and shouldn't cost overly much provided you don't go to KPMG or some fancy outfit like that.

 

[Roberto]

UK trading and taxes: one or two interesting points in this 2-page thread: http://www.moneytec.com/forums/showthread.php?t=13816

 

[the blades]

UK trading and taxes: one or two interesting points in this 2-page thread: http://www.moneytec.com/forums/showthread.php?t=13816

now let me think for a nanosecond.......who does Tim nn remind me of?

And I thought he'd be battle weary enough from T2W! 😆

UTB

 

[Salty Gibbon]

who does Tim nn remind me of?

A right wally, I'd say m8.

 

[the blades]

A right wally, I'd say m8.

whilst you and I agree on a good few things SG ( 😉 , I won't have you talk about Roberto like that 😆 😆 😆 😆 - he's a top man.

UTB

 

[Salty Gibbon]

It was just the way he was going on about accountants that's all.

I was smiling because I am a Chartered Accountant and the things he said amused the hell out of me.

Apologies to Roberto and yes Blades, we do agree on a lot of things don't we, lol !!!

How is Sheffield these days ? Went to University there many many years ago and spent 7 years of my life there all in all. I supported Sheffield United when Tony Currie was THE man.

Showing my age here and also going right off topic.

 

[the blades]

How is Sheffield these days ? Went to University there many many years ago and spent 7 years of my life there all in all. I supported Sheffield United when Tony Currie was THE man.

Showing my age here and also going right off topic.

Well I'm biassed but......

I love the place. We will always suffer the Full Monty image (and most Sheffielder's LOVE the film) but in fact it's nothing like that nowadays.

The pits have gone, the steel has been streemlined and that left the place on its' **** for years. But over the last few years it has picked up incredibly and is a superb place to live - on the edge of the peak district (could go on all night....). Contrary to probable beliefs, Sheffield hallam is the most affluent seat outside London (Kensington and Chelsea).

Interetsing to see you once lived here - but I must correct you - Once a blade, ALWAYS a blade 😆

UTB

 

[Salty Gibbon]

Blades

Why don't you start a thread on "Sheffield" in the Lounge ?

I have fantastic memories of the place and it would be good to reminisce.

And forgive my ignorance but what the hell does UTB stand for ?

 

[the blades]

Blades

Why don't you start a thread on "Sheffield" in the Lounge ?

I have fantastic memories of the place and it would be good to reminisce.

And forgive my ignorance but what the hell does UTB stand for ?

Salty,

UTB = "up the blades" - cheesy club merchandise once used this logo - now it's an occasionally used Internet signature of The Blades' footy message boards.

I will open a discussion on the delights of the steel city in "the lounge" in the next day or so.

Goodnight all.

UTB

PS apologies to others for hijacking the thread - normal service can be resumed.

 

[Roberto]

apologies to others for hijacking the thread - normal service can be resumed.

Not at all ... the diversion was perhaps more interesting than the rest, and I think the original question had been answered anyway?

 

[etext]

UK Taxes on Currency trading

The problem as I have discovered over the last couple of years is getting the Inland Revenue to commit themselves on this issue.

The argument as I have so far understood it is - Currency trading is classed as spreadbetting and is not eligible to be taxed if you are doing it part time - ie as a hobby. If there is any suggestion that you are doing it full time (your only source of income) or commercially then it is taxable.

But believe me the UK Inland Revenue twist and squirm like a wriggly thing on a hook over this issue.

Their problem is quite simple - if they tax you on your gains (if you have gains) then you in turn can claim tax relief on your losses (if you have losses), and as the majority of traders - something like 90 per cent lose their shirt, they do not want all of these traders claiming their losses against other tax that they have paid to the revenue via their other means of income.

So whilst you lose, or your gains are small the revenue are happy to claim that you are only doing it is a hobby.

However if you suddenly start to gain hand over fist vast and huge sums of dosh they will certainly sit up and take notice and quite probably suddenly announce that in their opinion you are doing it professionally and will want to tax you on it.

Your advantage then of course is that you can then claim all of your expenses in the pursuit of your trading - you know - your tools of the trade - your computers because you will want two or three running side by side to keep pace with the markets in different formats, those trips to the USA to meet your broker, those trips to switzerland to open your offshore accounts, your monthly broadband connection, the trips to the forex seminars, etc, etc.

The bottom line is - there are no written rules here that I can find that spell it out for you in black and white because they want to keep all of their options open ie - to claim that it is a hobby whilst you are not doing very well and then to suddenly leap in and claim it is being done proffessionally when you make a wedge.

Let me put it another way - If you walk into your High Street Bank tomorrow morning and buy 50,000 dollars at the current rate, stuff them under your mattress, and then go back in a months time and sell them again and make youself £100 profit, are you going to inform the revenue? Is it taxable?

I would say the answer is - NO. And if they say - Yes it is, and they want to tax you on it then the following month when you do the same again and lose £500 you can obviously claim your loss against other tax that you pay.

Welcome to the minefield.

 

[darrenf]

Hi

At what stage has currency trading been classed as spreadbetting for UK tax purposes?

Presumably you mean when using a "real" fx broker such as fxcm, oanda, gft and the like?

I know this is virtually the same as using a sb co when looking at the mechanics of the actual method of trading but I have never seen a reference suggesting that currency trading via a broker falls in to the same category of taxation as SB in the UK?

Would be very interested to find out more about this as I do have accounts with fx brokers.

 

[etext]

Hi Darren,

You ask - "At what stage has currency trading been classed as spread betting for UK tax purposes?"

My question is - At what stage hasn't it?

I have heard and read a number of people including accountants who try to differentiate between the two, and I have heard as many, including accountants who argue that there is no difference.

My problem is - I cannot find any GB Inland Revenue statement either online or off-line which upholds that there is a difference between spread betting and dealing with somebody like Oanda or FXCM.

If anybody can point me in the right direction I would appreciate it.

Here is one for you - go to both of the following links below


http://www.cmcgroupplc.com/us/forex/home.jsp

http://www.deal4free.com/spreadbet/home.jsp

While you are on the deal4free site click the link on the left for "Who is deal4free" have a read.

Now, this is the same company, you use the same software, the same trading platform, the same everything. So is it Online Forex dealing or is it spread-betting?

Hi

At what stage has currency trading been classed as spreadbetting for UK tax purposes?

Presumably you mean when using a "real" fx broker such as fxcm, oanda, gft and the like?

I know this is virtually the same as using a sb co when looking at the mechanics of the actual method of trading but I have never seen a reference suggesting that currency trading via a broker falls in to the same category of taxation as SB in the UK?

Would be very interested to find out more about this as I do have accounts with fx brokers.

 

[darrenf]

Interesting!

I fully understand that to the person actually trading the instruments, there is little or no difference between trading fx via a broker or SB. Indeed you have highlighted that in cmc's case there is no difference other than slight differences in the trading platform.

There are many methods of trading many instruments, spot fx through a broker or SB, direct access stocks, futures, commodities, options etc etc. However, as I understand it, the only one that can be deemed as exempt from income and cgt in the UK is profits derived from spreadbetting. (and as many have debated before us, this may not always be the case if it is your sole/ main income).

My understanding is that the revenue will view it according to the structure of the company you are dealing through. ie if a registered SB company, then exemption from cgt and income tax (for most ) applies. I think SB comapnies are pretty unique to the UK (and our aussie friends too) and I am not aware of any other type of trading that offer tax exemptions.

If you follow the argument that trading fx through an online broker is virtually the same as trading through a SB therefore profits from your fx broker account should be exempt from tax because it's the same as SB'ing, then you could argue that trading CFD's, futures, stocks should also be tax free. Somehow though, I do not think this would wash with the revenue.

I would love to be corrected on this, but as I undersand it, the only way to be exempt from tax on trading is to trade through an SB company. Any other type of trading profits will be declarable for either income tax (if carrying on trading as a "trade" or "profession") or CGT if a part time/ not main income type of venture. Profits from trading with an FX broker, I think fall into the second category.

As I say though I would be very interested to see any evidence to the contrary, and would be more than pleased to be shown I am wrong about this 😆

 

[Roberto]

Here is one for you - go to both of the following links below
http://www.cmcgroupplc.com/us/forex/home.jsp
http://www.deal4free.com/spreadbet/home.jsp
While you are on the deal4free site click the link on the left for "Who is deal4free" have a read.
Now, this is the same company, you use the same software, the same trading platform, the same everything. So is it Online Forex dealing or is it spread-betting?

If you trade through CMC it's online forex-dealing. If you trade through d4f it's spread-betting. Only their UK-based clients can take advantage of the fact that spread-betting is tax-free.

But as Simon Denham, the MD of Capital Spreads, was commenting recently in an interview I read, they have clients all over the world anyway. (Just not in the US, where spread-betting remains illegal because of the "gambling" connotation). These are for the most part serious and experienced traders attracted to spread-betting as their main trading-method for many of its _other_ advantages (i.e. apart from the obvious tax advantage).

I would love to be corrected on this, but as I undersand it, the only way to be exempt from tax on trading is to trade through an SB company. Any other type of trading profits will be declarable for either income tax (if carrying on trading as a "trade" or "profession") or CGT if a part time/ not main income type of venture. Profits from trading with an FX broker, I think fall into the second category. As I say though I would be very interested to see any evidence to the contrary, and would be more than pleased to be shown I am wrong about this 😆

You can choose, if you want to, to have your profits from trading with a Forex broker assessed for income-tax rather than CGT simply by declaring yourself to be a "professional trader". AFAIK, you can do this whether it's your main source of income or not. It's not immediately apparent how anyone would gain from doing so, though, apart from perhaps someone with extremely unusual circumstances (i.e. lots of other capital gains and no earned income at all).

The annual "tax-free allowance" for CGT is considerably higher at about £8,500 than the personal allowance for income tax, though it's also easier in practice to claim things against income-tax than it is against CGT.


The important point is well summarised in another thread:

In case anyone's lost among all the words and argument here, let's just state a couple of things openly, simply and clearly here:

(i) no UK resident has ever yet been assessed for income tax or any other form of tax on any spreadbetting profits.

(ii) the Inland Revenue has never announced, indicated or threatened any action or intention to try to tax any UK resident in any way on any profits resulting from spreadbetting.

That's absolutely correct, of course. This remains the "key concept".

If either of those statements ever becomes untrue, it will certainly shake the world of trading to its core and be extremely well publicised.

 

[etext]

Hi Roberto,

Thanks for the input, I have just searched for the quote by DR on the board and after reading 12 pages of some quite nasty coments by some of the members (now banned) I was just about losing the will to live 🙁 and so gave it up.

In my particular case it is all academic as I am not yet in profit with either of teh accounts that I have with CMS or FXCM. I have traded for 18 months now and sustained losses which were out of pure inexperience and folly. Now after 18 months of study I have stemmed the losses, begun to turn the corner and am holding my own - Hey, holding my own is a great achievement as far as I am concerned.

If all goes according to plan the gains should now slowly accumulate because the principles that I am now working on work out ok on paper.

I suppose that if and when I get to the magic £8500 profit scenario it will be very worthwhile to take a look at D4F and at the tax advantages.

Indeed I may well download their demo and see what it is all about.

Once again - thanks for the input

Etext