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  • FIRST POST
    • debtless
    • By debtless 12th Jan 19, 12:02 PM
    • 7Posts
    • 0Thanks
    debtless
    Offsetting CFD trading losses against self-employed income
    • #1
    • 12th Jan 19, 12:02 PM
    Offsetting CFD trading losses against self-employed income 12th Jan 19 at 12:02 PM
    Hello,

    In the 2017-2018 tax year my CFD trading losses exceeded my self-employed income. I was also a full-time PAYE employee.

    Can I offset the CFD trading losses against my self-employed income?

    A potentially very significant point is that in the tax year under consideration, my CFD trading activity was much larger than my other side self-employed activities. This means that the CFD trading was my principal self-employed activity and my losses would therefore be classed as business loss rather than capital losses, which means that they can properly be offset against the other income. Would you concur?

    Ali -v- HMRC might be the key authority here.
Page 1
    • short butt sweet
    • By short butt sweet 12th Jan 19, 3:44 PM
    • 284 Posts
    • 229 Thanks
    short butt sweet
    • #2
    • 12th Jan 19, 3:44 PM
    • #2
    • 12th Jan 19, 3:44 PM
    very doubtful. ali vs hmrc was very interesting, but it is not a legal precedent because it was only a tribunal decision, not a higher court. what we can say is that whether trading activity constitutes a business is highly dependent on the specific facts of the case, and there is no single test that is decisive.

    whether you spent more time on CFD trading than on other side activities isn't the point. it's the nature of the CFD trading activity that matters. the tribunal in ali's case seemed to be impressed with how systematically he went about it. other tribunals might emphasize different factors.

    how long have you been trading CFDs? would you contend that this has always been a business, or has the nature of the activity changed at some point, and if so, in what way?
    • Economic
    • By Economic 12th Jan 19, 4:59 PM
    • 448 Posts
    • 468 Thanks
    Economic
    • #3
    • 12th Jan 19, 4:59 PM
    • #3
    • 12th Jan 19, 4:59 PM
    How did you treat profits/losses from trading CFD for tax in previous years (gains or income) and how will treat profits/losses from CFD trading for tax in future years?
    • debtless
    • By debtless 12th Jan 19, 5:07 PM
    • 7 Posts
    • 0 Thanks
    debtless
    • #4
    • 12th Jan 19, 5:07 PM
    • #4
    • 12th Jan 19, 5:07 PM
    Many thanks for taking the time to reply.

    My trading activity entailed numerous trades made on a regular basis throughout that tax year. The intention was to generate income (profit motive). I definitely saw the money spent as an investment in a business rather than the occasional "investment".

    I suppose my main question is: should I go ahead and report it as a business loss and be prepared to defend that position if it is challenged?

    I have a good-faith belief that I was running a side business with my trading, but I am not sure what the proper way is to ensure that everything is above board. Any further advice would be gratefully received!

    Addendum in reply to Economic: that was my first year of trading. In future years I would treat it as a business if it is my main activity and as capital gains if it is only occasional.
    Last edited by debtless; 12-01-2019 at 5:20 PM.
    • debtless
    • By debtless 12th Jan 19, 7:49 PM
    • 7 Posts
    • 0 Thanks
    debtless
    • #5
    • 12th Jan 19, 7:49 PM
    • #5
    • 12th Jan 19, 7:49 PM
    What if I call HMRC and ask for advice? Bad idea?
    • short butt sweet
    • By short butt sweet 13th Jan 19, 1:00 AM
    • 284 Posts
    • 229 Thanks
    short butt sweet
    • #6
    • 13th Jan 19, 1:00 AM
    • #6
    • 13th Jan 19, 1:00 AM
    well, that is how self-assessment works: you submit your view about what your profits, gains, etc, are for tax purposes, and then HMRC can challenge it. you should clearly disclose enough information that they can figure out whether this is a case they might want to challenge. e.g. in the "description of business" field under self-employment. (you fill in 2 sets of self-employment pages, if you have 2 different businesses.) there is also an "additional information" box, if you want to provide more detail.

    i doubt you'd get any useful info over the phone. HMRC seem to have enough trouble answering routine questions there.

    if HMRC did challenge your return, you would probably want to get somebody (lawyer or accountant) to represent you at the tribunal.

    is it worth going down this route? if you expect to make profits from CFDs in the future, you could eventually be better off if your trading is not classified as a business. and HMRC are unlikely to argue it is a business, unless you argue it is. but if you successfully argued that it's a business now (when you have losses), they might be more likely to argue it remained one in the future (when you hope to have gains).

    also (a very different subject), why do you expect to make profits in the future?
    Last edited by short butt sweet; 13-01-2019 at 1:03 AM.
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