Stock trader

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Lina
Lina Registered Posts: 41 Regular contributor ⭐
in General accounting discussion
I have a new client , he traded all year as a stock trader. Not registered with HMRC . I mean he never completed a tax return before.

Made profits of 20K in 2010-2011.

Not sure what type of income that is. Shall i complete SE pages on the tax return and call it a stock trade? Or maybe there is smth else?

Any suggestions? Thanks

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  • PGM
    PGM Registered Posts: 1,954 Beyond epic contributor 🧙‍♂️
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    How does he trade stock?

    Some methods such as spread betting aren't taxable!
  • Lina
    Lina Registered Posts: 41 Regular contributor ⭐
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    He has an account with TD Waterhouse where he invested some money. He buys and sells different companies shares. Every quarter he gets a summary from TD Waterhouse about his profits.
  • Jmann
    Jmann Registered Posts: 68 Regular contributor ⭐
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    Its capital gains not income tax.
  • Monsoon
    Monsoon Registered Posts: 4,071 Beyond epic contributor 🧙‍♂️
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    If he's doing it with the intent to make short-term profits, it could be classed as self employment and trading income - couldn't it?
  • Lina
    Lina Registered Posts: 41 Regular contributor ⭐
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    that is why I am not sure. Capital gains or se profits.This is a daily trade and not that he gained profit for selling one or few companies shares. During a month he buys and sells many.It would even be impossible to calculate which companies shares made profits.

    Once I had similar question about profits from sale of houses. If you sell one house and make a profit , then it is capital gains tax. But if you do business of buying and selling houses and you have few sales in a year then it classifies as a trade. And it does make sence. I aksed in HMRC in one of their events.

    I hope I will get more suggestions.

    Thank you
  • Monsoon
    Monsoon Registered Posts: 4,071 Beyond epic contributor 🧙‍♂️
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    Lina wrote: »
    If you sell one house and make a profit , then it is capital gains tax. But if you do business of buying and selling houses and you have few sales in a year then it classifies as a trade. And it does make sence. I aksed in HMRC in one of their events.
    That's my understanding of income that is usually subject to CGT but that can be carried out as a trade.

    Note Spread Betting was previously mentioned. As this is gambling, it's always tax exempt I believe.
  • PGM
    PGM Registered Posts: 1,954 Beyond epic contributor 🧙‍♂️
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    Monsoon wrote: »
    If he's doing it with the intent to make short-term profits, it could be classed as self employment and trading income - couldn't it?

    I agree. But it still depends on the type of account he uses, to whether it is taxable at all.
  • Lina
    Lina Registered Posts: 41 Regular contributor ⭐
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    what do you mean - what type of account he uses? Does it make a difference?

    I do not think that there is a question of whether it is taxable or not. 100 % it is. Question is : how to treat this income?


    thanks
  • Jmann
    Jmann Registered Posts: 68 Regular contributor ⭐
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    Lina,

    It seems that you ignored my post completely, share trading is always subject to capital gains unless you are a registered trader i.e. member of Stock Exchange.
  • Jmann
    Jmann Registered Posts: 68 Regular contributor ⭐
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    Monsoon wrote: »
    If he's doing it with the intent to make short-term profits, it could be classed as self employment and trading income - couldn't it?

    Share trading is exception to the normal trading rule. It is subject to CGT not income tax unless you are a registered trader.
  • PGM
    PGM Registered Posts: 1,954 Beyond epic contributor 🧙‍♂️
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    Lina wrote: »
    what do you mean - what type of account he uses? Does it make a difference?

    I do not think that there is a question of whether it is taxable or not. 100 % it is. Question is : how to treat this income?


    thanks

    Yes its makes a difference, many "day traders" use spread betting and other similar methods to trade stocks, currencies, futures etc.

    So no, it isn't 100% definite unless you know the answer to this!
  • Monsoon
    Monsoon Registered Posts: 4,071 Beyond epic contributor 🧙‍♂️
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    Jmann wrote: »
    Share trading is exception to the normal trading rule. It is subject to CGT not income tax unless you are a registered trader.

    Thanks JMann, didn't know that.
  • RAS
    RAS Registered Posts: 124 Dedicated contributor 🦉
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    Agree with PGM. Be very careful to understand exactly what these transactions are, it could well be the client is not actually buying and selling shares but effectively betting on the movement of individual share prices. Have a look at the documentation very closely. If he is buying and selling shares then probably there would be an annual tax summary provided by the stock broker. Careful, as would be easy to mess up big time on this.
  • Lina
    Lina Registered Posts: 41 Regular contributor ⭐
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    Thanks for your answers. I called HMRC and they told me to tax under CG.

    I will talk to the client and see if he bets on the shares or buys them. It is not as simple as i thought in the beginning.
    Thanks to all the comments/ learned a lot :)

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