Financial Activity – Is it a trade or investment?
Whether an activity of buying and selling shares constitutes a trade is a question of fact. As with any other activity you need to consider the relevant circumstances as a whole.
There are a number of key questions that should be asked:
- The experience of the person carrying on the activity and whether or not they are regulated and if the person deals in a wide range of instruments?
- The reason for commencing the activity?
- How the activity was initially funded?
- How precisely the activity is carried out – are you making the decisions or are advisors involved?
- Is there a profit making strategy or was a limit placed on the losses that would be tolerated?
- The number and frequency of transactions?
- The time devoted by the person to this activity?
The two main badges of trade affecting Financial Traders are the ‘motive of the individual’ and the ‘transactions themselves’. When applying these you should also consider whether the income is the sole income or if the person has another type of employment or self-employment?
The two types of income (trading or investment) have quite different tax treatments and in order to protect yourself from a hefty tax bill you should seek professional tax advice.
To speak to one of our tax specialists please contact us.
Capital Gains Tax Planning for Investors
Investors in Shares, Forex, Options, Futures and CFD’s are all potentially within the scope of capital gains tax.
Fortunately there are specific CGT reliefs as well as tax structuring opportunities that investors can use to reduce or even avoid capital gains tax.
Income tax planning for investors & traders
If you’re classed as a trader in Shares, Forex, Options, Futures or CFD’s you’ll be subject to income tax on your trading profits. As the top rate of income tax is 45% any strategies to reduce this can have a significant impact on your ‘takehome’ profits.
Tax Planning for Financial Investors and Traders with Non UK Domicile
If you’re a trader or investor in shares, forex, futures/options or CFD’s and have non UK domicile status there are a number of tax planning opportunities available to you.
Tax Planning for Non UK Resident Financial Investors and Traders
Non UK residence can be a very attractive way to reduce UK tax whether you’re a trader or investor in shares, forex, futures, CFD’s or options.
By establishing non UK residence you can:
avoid or reduce capital gains tax
avoid or reduce income tax on dividends, interest and trading profits
establish offshore companies and trusts much more easily for future tax structuring
potentially avoid national insurance
We are specialist tax accountants and are used to working with our clients to ensure they are only paying the right amount of tax and where necessary speaking to HMRC to reclaim overpayments.
If you are looking to secure additional finance, we have an extensive amount of corporate financial knowledge to help you secure additional finance be this:
- CIBLS and other Covid-19 related funds
- EIS & SEIS investment
- Other finance options
Our main aim is to be flexible and adaptable to your needs as no business or individual is the same. So, if you want to speak to someone to see if you are getting the right support or if we can provide additional services contact us for an initial chat, at no cost to you.
If you want to find out more about the services we offer have a look at what we can do for you here.
Contact us now to find out how we can help improve your cash flow and profit.
We adapt our business, accounting and taxation knowledge, experience and the latest technology to suit your needs. Charterhouse is a progressive and dynamic accountancy firm that will help you and your business succeed.
Creating bespoke, cutting edge solutions and advice that generate new possibilities for growth for SME’s, Corporates, High Net Worth Individuals, Start-Ups and Individuals is at the heart of everything we do.
Charterhouse believes that anything is possible. We don’t see problems, we see challenges and will find the solutions to overcome them.