Forex trading through my LTD

[Jog On]

Any advantages to doing this through the LTD as opposed to as an individual?

What are the liabilities - CGT, corp tax both?

Just a basic overview would be nice

Did I mention I'm looking for a new accountant as well?

[northernladuk]

Any advantages to doing this through the LTD as opposed to as an individual?

What are the liabilities - CGT, corp tax both?

Just a basic overview would be nice

Did I mention I'm looking for a new accountant as well?

Tut tut. You are a long time poster, you should know better. Both these topics have been done to death plenty of times. The search button should come back with enough threads to keep you happy for hours.

If you want to invest I believe if you have to watch the limits. If you do over a certain rate depending on your income you will have to recatagorise your company as an investment company not an IT contracting one for a start so FRS will change etc..

Anyway... its in all the other threads...

[Jog On]

Tut tut. You are a long time poster, you should know better. Both these topics have been done to death plenty of times. The search button should come back with enough threads to keep you happy for hours.

If you want to invest I believe if you have to watch the limits. If you do over a certain rate depending on your income you will have to recatagorise your company as an investment company not an IT contracting one for a start so FRS will change etc..

Anyway... its in all the other threads...

Nope - just did a search and nothing there specifically about FX trading through a LTD vs as an individual.

I know about the limits and having to recatagorise etc. My specific query is regarding CGT/corp tax etc.

OK take 2:

Can any of you nice clever accountant types who are familiar with my situation as a contractor with a LTD company please just give an overview of the tax liabilities for FX trading?

I need to know whether it's better to trade as a LTD or an individual as I'm now trading live and making money (through a retail individual account).

[adestor]

I was talking about currency trading to a colleague the other day (as an individual). He said that any money you make is tax free as it's looked upon as a form of gambling. Don't know how true a statement this is though, but might be worth looking into.

[Jog On]

I was talking about currency trading to a colleague the other day (as an individual). He said that any money you make is tax free as it's looked upon as a form of gambling. Don't know how true a statement this is though, but might be worth looking into.

Yeah this is the kind of thing I'm looking for clarification on. I think that's the case for spread betting and futures - not sure about FX though.

I don't mind paying a bit of tax on it and I'm all for being in a position where I have to reclassify my company.

I'll talk to an accountant..

[Maslins]

Yeah this is the kind of thing I'm looking for clarification on. I think that's the case for spread betting and futures - not sure about FX though.

Seen a few cases of this/similar in the last year, and nobody really seemed to be able to come up with a definitive answer. Lots of opinions, but not much else (which I'm afraid is all I've put below).

One client who was spread betting had various conversations with HMRC who seemed to say they considered it gambling (hence despite him making a decent living he was unemployed as far as they were concerned). He tried to get them to put this in writing but they wouldn't. I think HMRC want to consider it gambling, because I'm sure there are a lot of speculators who lose money, and if it was trading these people would set the loss off against other income.

Even if HMRC don't consider you to be gambling, there's then the question of trading vs CGT. IMO CGT is out the window on the assumption you'll be buying and selling things minutes, or at most hours apart. You're not buying for long term investment.

For the sake of argument if it was CGT, doing it as an individual would almost always be by far the best option, as you'd get your ~£10k annual exemption, and only pay 10-18% on any gains above that. This is even if you have substantial other income from contracting.

If it's considered trading, then it's a bit less clear cut. Is there a reasonable possiblity of a loss?

I think your best bet is having a conversation with HMRC to ask them what they think the specific transactions you're planning on undertaking should be classified as. Try your best to get something in writing from them. Note that even if you do have something in writing, this doesn't stop them changing their mind at a later date, but it does mean they can't penalise you if they do.

Sorry to not be more help, but I think basically the UK tax system as it is, isn't really set up to deal with things like this.

[jetrimby]

HI If done via spread betting then this is gambling as far as revenue is concerned Futures contracts are not gambling so are potentialy taxable.

There are some odd rules here that, with exchange rates moving so much recently, have some very nasty effects (someone with overseas property maybe paying gains tax despite having made no cash profit (losses on foreign morgtages can't be offset)
I'd try a search in "moneysavingexpert" forums and I am sure you will find so threads covering this to some extent. Sorry dont' know exact answer off top of head!

[Iron Condor]

The company will only pay Corp Tax not CGT.

A company that only does frequent short term FX trading is likely to be a trading company not an investment company (so pay lower rate corp tax on first 300K of FX trading profits).

If the company mixes IT Contracting with FX trading then the FX profits are more likely to considered an investment.

Spread betting in your own name is tax free unless you do weird things ( like run your own spread bet book with members of the public and use another spread bet firm to offset risk). But plain vanilla spread betting even if done full time is 100% tax free.

In a personal brokerage account FX speculation will be most likey subject to CGT even if you do it short term.

But if you scalp FX for a few ticks (ie very very short term trading), then that might be classsed as income tax and not CGT, because most of your profits could be coming from the bid/ask spread in prices and not from directional speculation of price changes.

When short term trading in your own name and wanting to claim CGT, it is important to think of it and refer to it as 'speculation' and not as 'trading' if speculation is in fact what you are actually doing.

http://www.hmrc.gov.uk/MANUALS/bimmanual/bim65701.htm

How much tax you pay end up being subject to is a lot like IR35, "if agreement cannot be reached, an issue for the Commissioners to decide."

[Bright Spark]

last year I opened a spread bet account which is
similar to fxcm forex account, main thing is you avoid all uk taxes.

http://www.fxcm.co.uk/forex-spread-betting.jsp

[fxjmcalster]

My suggestion is to look for a broker which does not disclose tax data. Register as an individual and start trading. When you apply for a corporate account, you must provide all the documents for the registered owners, board of directors, registration documents etc. along with a power of attorney for the representative. In my opinion is too much of a hassle.

William Smith
FX Central Clearing Ltd
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