eToro Trading - USD TO GBP (CGT)

AnotherJoe

love2learn wrote: »

If HMRC wanted to make sure they were getting exactly what they are owed, then the gain should not be classed as realised until the end of the tax year.

The gain isnt realised, across your whole set of trades, until the end of the tax year.

So I would then simply say I made X amount of USD (and evidence it) after all trades are considered. If I then withdraw that amount to my UK bank account the proceeds are X after the conversion so I made X amount of money that year... please tax me accordingly. They arent going to let you accumulate gains offshore unless you are in the higher echelons of society. Us plebs have to pay up

Then HMRC are not being underpaid, nor are they being overpaid... they are just getting what they are actually owed. It seems the part that's wrong is working out exchanges of currency that didn't even take place, and therefore sometimes under reporting the profits. ....or over reporting.

I would just want to pay what I owe, and HMRC make it stupidly hard and also appear to lower their own tax take by doing do. What you owe is as defined by their way of working it out. Not yours.

I try to discuss this in detail tomorrow with one of their guys on the phone with specialist knowledge... they call them inspectors.

Not many people trade like you in one neat account, one set amount of money in and one out at the end of the year. You are looking at it from your unusual POV.

Most would have money coming in and out at different times, multiple trades some using money that came from elsewhere other trades maybe in different currencies. Their way is simple and consistent even if a PITA to monitor, each trade measured on its own merits.

You also cant say they are getting less money than they would in "your method", it depends what the trades and exchange rates are but if they are, be happy and stop moaning about it.

love2learn

londoninvestor wrote: »

The methodology of "measure the gain in foreign currency and convert that all to GBP using the exchange rate at the time of sale" would result in more tax being paid when the pound is rising, less tax being paid when it's falling. I suspect it might average out about the same for the government in the long run, but there you go!

So even though there isn't a single exchange of currency actually happening on any of the trades at all... they still want me to use the exchange rate for the purchase and sale dates, even if that means they tax me on money I haven't even earned?

Makes no sense to me, and that Pike case doesn't go into detail like that.

It would make complete sense to me if the trade was happening from a UK broker, where the GBP is converted to USD at the point of purchase and sale. But it's not, it's an off shore broker and the money is already in USD before the purchase and sale takes place.

It seems HMRC's rules need to be updated to take this into consideration... I'm not trying to avoid tax, I'm trying to avoid under or overpaying tax... by doing the above, both could easily happen.

londoninvestor

love2learn wrote: »

So even though there isn't a single exchange of currency actually happening on any of the trades at all... they still want me to use the exchange rate for the purchase and sale dates

So looking at the whole cycle of your activities.
A: Convert some GBP into USD, and hold it as USD cash for a while. The USD fluctuates in terms of its GBP value as the exchange rate moves.
B. Enter into a trade
C. Close the trade and receive USD
D. Hold the USD as cash for a while - it fluctuates in terms of its GBP value during that time. Then eventually you convert it back to GBP and withdraw

The thing is that parts B and C constitute an activity that's subject to CGT (trading CFDs or stocks), while A and D constitute an activity that isn't subject to CGT (holding foreign currency in an account). So adding them together doesn't give you your correct CGT position.

love2learn wrote: »

even if that means they tax me on money I haven't even earned?

So in a sense you have earned it, because as soon as you close the trade, you've got USD which you can either:

1. Withdraw as USD and spend as USD without ever converting it
2. Convert to GBP straight away
3. Hold onto as USD for a while, then later convert to GBP

The idea is that whichever one of those you choose, the CGT position is the same. Because at the point you exit the trade, you've ended the part of the activity that's subject to CGT, so your subsequent decisions on what to do with the cash don't impact CGT one way or the other.

You obviously are free to lobby for a change in the law, write to your MP etc!