W8-BEN Form - some advice please

[fastnet]

I am about to open a broker account in the US. Well, this is th intention but total confusion over the issue of tax is putting me off.

I have waded through the discussions on this board but opinion is split.

I'd be very grateful if someone who has opened an account could offer a little advice.

I have been sent a W8-BEN form but the broker is reluctant to tell me exactly what the tax implications are of signing this form. I suppose they don't want any liability. They have asked m to consult a lawyer/accountant etc.

What does the W8 form actually mean? that I am exempt from US tax? If so I would have to pay UK CGT over the allowance. However, when would this be paid? I have never needed to file a return as all my income from one source and I am taxed at source.

What's the best thing to do? Are trading profits (not spreadbetting) taxable as income or capital gains?

It's VERY unclear. The IRSs intructions for completion of the W8 form runs to 6 pages of dense legalese. . . .

I would be grateful for any help.

Regards

FN

 

[Roberto]

Are trading profits (not spreadbetting) taxable as income or capital gains?

That's the only one of your questions I can answer ...

They're taxable as capital gains, unless you choose to declare yourself to be a "trader" to the I.R., in which case you can voluntarily pay income tax on them instead. The tax-free allowance is much higher for CGT (around £8,500) but it's generally much harder to claim deductible items against CGT as well.

Sounds like maybe you do need to speak to an accountant, though? I keep trying to volunteer Salty for such purposes but he always claims to know bugger all (a likely story ...).

 

[roguetrader]

Fastnest you should consult someone in a professional capacity about this sort of thing, a bulliten board is not a reliable source of information for making decisions about what you should declare to the inland revenue.
That said my iunderstanding is that a W8 BEN is a tax witholding form allowing the broker to accept a declaration of being exempt US tax which would be the case if you are a UK national resident in the UK.
As far as UK tax is concerned, I am less certain about this because I have only become resident here recently, but it is my understanding that if your earnings from stocks are not your main source of income then they will be taxed as capital gains, as of last year you would have been allowed to earn approx 8K prior to being taxed. If you are below that allowed figure and your turnover in stock value is less than 32K per year then I believe you are not even required to declare, though I can't see how a trader could keep his turnover below that figure.
But as I say consult an accountant, you do not want to get done for Tax irregularities

 

[ardhill]

I filled out a W8 BEN, this means that the US govenment will not tax me on my trading earings on my US account.

As for what to do with all your hard earned winnings - talk with a tax advisor.

I just give all my details to mine and she does all the work and files the appropriate forms. It doesn't cost that much and is well worth it to take to concern off my shoulders. I have a hard enough time trading, without trying to figure out tax returns as well.

 

[frugi]

Roguetrader et al are correct, although personally I would not bother seeking expensive professional advice, at least on the W8-BEN matter. The W8-BEN form simply tells the US I.R.S that you are exempt from US tax because you are not a US citizen. It is nothing to worry about, a mere formality.

If you have a main, obvious source of UK income taxed by PAYE and trading simply provides a supplementary income then you will only have to pay CGT on profits above the personal CGT allowance, currently c8k. Income tax is not an issue unless trading provides your sole source of income and even then the position varies from tax office to tax office. Ask the Revenue for a CGT form after Apr 5th if you think you are liable for CGT in any tax year, or indeed if the total proceeds from your equity sales exceed about double this figure (?) - the current "turnover" figure will doubtless be on the IR website somewhere.

 

[NedKelly]

Fran - you could get a job as an accountant with all your knowledge :cheesy:

 

[fastnet]

Sincere thanks to all - I had a good read through the 6 page instructions for this form and have now decided upon a suitable course of action.

Thanks for the advice.

Regards

FN

 

[jonnyy40]

IB users will have to ensure their W-8BENs are up to date by the 15th of this month.