Classification as trader rather than investor

citadelp

Hi,
Maybe someone has some experience with this and can help: I have been trading forex and cryptos in tax year 2019/20 and incurred a loss, so ideally I want this to count as income in my self assessment, which requires classification as trader rather than investor.
How would one go about that? I have a regular day job, so I do not know if I have a chance at all for that classification, but I read that "you could have another occupation, trade frequently with sophisticated risk management and a commercial set up and have a better chance of being classed as a trader". Given that over the course of the tax year I have executed 710 trades, I hope that the level of daily commitment shown by the number of trades would help. Can anybody share some helpful insight on what I should be careful about to have a realistic chance to be classified as trader and subject to income tax (or in this case refund) in this situation?
I highly appreciate any help!

Jeremy535897

HMRC is extremely reluctant to treat an individual as anything other than a speculative investor, probably because more people make losses than profits. See https://www.gov.uk/hmrc-internal-manuals/business-income-manual/bim56860

citadelp

Thank you for this link, interesting cases, that show it isn't really clear-cut. As far as I understand this, there's no harm in trying to get it declared as trading loss rather than investment loss. If I were to seek this in self assessment, what'd be the right place to put this, would it be a self-employment declaration?

dctrgre

citadelp said:

Thank you for this link, interesting cases, that show it isn't really clear-cut. As far as I understand this, there's no harm in trying to get it declared as trading loss rather than investment loss. If I were to seek this in self assessment, what'd be the right place to put this, would it be a self-employment declaration?

If it is indeed trading then yes, use the self-employment pages. As you should continue to do if you ever make a profit of course.

unholyangel

citadelp said:

Thank you for this link, interesting cases, that show it isn't really clear-cut. As far as I understand this, there's no harm in trying to get it declared as trading loss rather than investment loss. If I were to seek this in self assessment, what'd be the right place to put this, would it be a self-employment declaration?

Did you not understand the advice Jeremy has given or the manual he linked to? It is unusual for it to be treated as trading income, so for what reasons do you believe your circumstances are outwith the ordinary?

If you provide wrong information on a return, HMRC have up to 20 years to challenge and can levy penalties on top of interest charges etc. With the penalties being more or less severe depending on whether the mistake was honest, careless or deliberate. Imo this would be a minimum of careless. 

By all means, obtain advice tailored to your specific circumstances. But don't just try your luck, or it may come back to cost you a lot more than you initially benefit. 

Jeremy535897

I hoped my link would clarify, but as you have doubts read https://www.gov.uk/hmrc-internal-manuals/business-income-manual/bim56800 and the following sections. You really have zero chance of getting this treated as a trade, not least because I suspect you only thought of whether it might be a trade because you have losses. Nor are you helped by the fact that you should have registered as self employed by 5 October 2020 if you want to say you were trading in 2019/20 (assuming your other job is not self employment). See https://www.gov.uk/register-for-self-assessment/self-employed