Profit on Shares - CGT or Income Tax?

E

erneman

Guest
Iam a PAYE worker with some savings in a deposit account. Given that interest rates are so low, Iam going to venture into the more risky area of share trading.

My query is on the taxation of any profits that may materialise from my trades. Obviously, if I hold my shares for a period of time and sell them at a profit I will be subject to CGT less my annual allowance.

However, if I buy and sell shares in the same company on a daily or weekly basis ,would the profits from each trade be considered a capital gain or income?

Given, massive swings in share prices, my intention would be to monitor one or two companies and buy at their low point and sell when there is a 3/4% swing up. Then wait for them to come back again (could be hours,a day or week) and start the whole process again.

Would revenue view this constant flipping of the same share as income or a capital gain on each occasion.

Thank you for any advise you can give.
 
As far as I am aware each disposal would be subject to CGT
 
If you are buying and selling shares as frequently as you propose, you are trading in shares, and income tax is what you will pay, at your marginal rate.

Some "Badges of trade": intention ( yours is to trade).
time held ( longer the better)
nature of item sold
frequency of selling ( one off less likely to be trading)
 
Thank you for the advice Gervan. I accept it could be treated as income - despite my capital being at risk on each occasion and trading would not be my 9-5 occupation. I will leave a couple of weeks between the flipping and hope it is viewed as a Capital Gain and not Income to be taxed at the marginal rate.
 
Can I ask [apologies in advance for the length of this],

(1) that in the case of where you are trading frequently, e.g. day trading where you are buying and selling the same security in the same day [specifically ES futures on the CME Exchange, thru an American Broker] - that in this case you would be more likely be deemed a trade, so income tax applies?

(3) if this is your sole income activity [by which i mean that you have no other income from employment or otherwise], and you have a Standard Rate cut-off band of 27,400, which as i understand by law you are not allowed transfer to your spouse, that therefore the first 27,400 NET income [net profit] would be therefore at 20%, not the marginal rate?

(4) if it is deemed as a trade activity, you are allowed deduct reasonable expenses such as fees for charting packages, computer depreciation, training courses wholly and directly relevant to trading, aportionment of ESB/broadband bills [if trading at home]?

(5) Would you therefore have to fill in Panel B of the Form 11?


and finally, here's a mad one :)

(6) is there any way you could set up a self-directed PRSA that could buy futures contracts [or any other securities either here or abroad] and therefore the gain would be inside a pension wrapper, so you wouldn't pay tax at that point - obviously you pay income tax when you draw from the PRSA when you retire. I'm not talking here about a expensive SSAP as I'm aware they're not cheap in terms of maintenance / annual fees to pensioneer trustees/actuaries etc.


thanks in advance for any comments on any of the above

PS: - some interesting links here:

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[broken link removed]trade.doc
 
In my view you would be trading and liable to Income Tax.

There could be advantages to this, as if you were to make a loss trading, this loss could be set against your other taxable income in the same year to create a refund of tax, whereas, if it was CGT, the loss could only be carried forward to be set against future gains.
 
thanks for that - if it is to be considered a trade therefore, is it the case that no VAT issue arises [i.e. it is vat exempt], firstly as it an exempt activity, and also because there is no "supply" ?

[broken link removed]
[broken link removed]

thanks again
 
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