Capital gains tax on shares.

Rupert_Bear

I have been busy doing some quick share deals. To date I have sold about £40,000 worth with a gain under £3000.00. I know if it is above £10,000 gain we have to declare to IR. However I read if the total sales is more than £40,000 for 2009/2010 and the gain is less than the tax free amount I still have to fill out tax form.

Does anyone why I would need to do this if no capital gains is due.

Cheers.

fengirl_2

Yes, even if your gains are under the limit, you need to declare proceeds over £40k.

Rupert_Bear

fengirl wrote: »

Yes, even if your gains are under the limit, you need to declare proceeds over £40k.

I understand it still needs to be declared but am at a total loss as to why when no capital gains is due. I tried to ring the tax office but no one was available. Apparently I needed to speak to a technician.

fengirl_2

I think its a way for HMRC to flag up where a lot of money is sloshing around. They might be looking for an increase in investment income as a result of this dealing.

roger_c

Just to clarify you are required to report disposals in the year if gains are over the annual exemption (£10,100) or proceeds are above the reporting limit (4 x the annual exemption = £40,400).

Rupert_Bear

I think Fengirl is probably on the right track here. However the good news is I have checked all my contract notes and the total amount of sales is £32,000 for this year. So based on that I will try and keep under the £40,400 threshold.

Thanks everyone for their input.

James,_Oxford

You need to be careful that your 'quick share deals' aren't treated as share trading!

Debt_Free_Chick

James,_Oxford wrote: »

You need to be careful that your 'quick share deals' aren't treated as share trading!

Yup - and the cynic in me wonders if this is the reason that deals over £40k have to be reported :rolleyes:

Rupert_Bear

James,_Oxford wrote: »

You need to be careful that your 'quick share deals' aren't treated as share trading!

Sorry I am even more confused now. Surely if the total sales is under the threshold and the gain that is all that counts. Also if it were counted as share trading what difference should that make. Cheers.

James,_Oxford

The tax treatment of the profit/gain you have made on the share sales depends on whether or not you are trading. In crude terms if the shares are acquired and held as investments then you will be within the capital gains tax regime, whereas if the shares are acquired and held as trading stock you will be within the income tax rules.

Capital gains tax is almost always advantageous because you have the benefit of the annual exemption as well as a lower rate of tax of 18% (not to mention more reliefs). Income tax on the trading profits could be taxed at 40% if you are a higher rate tax payer.

There are quite a number of factors which need to be considered when determining whether a trading activity is being carried on, and these factors have different weightings. If you acquired the shares with the intention of selling them on quickly for profit then this points towards trading.

pete80

James,_Oxford wrote: »

There are quite a number of factors which need to be considered when determining whether a trading activity is being carried on, and these factors have different weightings. If you acquired the shares with the intention of selling them on quickly for profit then this points towards trading.

James,

I have heard of this problem before in determining what constitutes "trading for a living" Is there any publication or IR helpsheet showing the factors used.

It doesn't affect me at the moment as I am Non-resident and currently just spread betting (gambling transactions) on stock market indices, and any share deals are made with US Brokers on the US Markets. I would just like to be clear for future reference in case my circumstances change.

Thanks