Posted on: 17th January 2017
HMRC aren’t interested in day traders
This is a viewpoint that we come across often. There are a number day traders, in addition to some in the tax and accountancy profession, that believe that HMRC aren’t interested in the activities of day traders. Many take this stance as they believe that HMRC looks upon day trading as an activity that generates losses. Therefore, if day traders’ reported these losses to HMRC, HMRC would have to let day traders offset their losses against other income or gains and lose out on precious tax revenue.
If this is the view you take and you’re a day trader that makes profits and losses, then don’t get too complacent! In their own words, HMRC are closing in on undeclared income, with the use of their “Connect” software. Connect is able to query large databanks and retrieve information linked to individual taxpayers. The information HMRC can retrieve from Connect is from both official bodies and from the purchasing of information from commercial sources. Connect can, therefore, obtain information of an individual’s transactions, their income and/or the businesses and assets they have. Should there be any discrepancies between the tax that should be paid, according to the information retrieved from Connect, and the tax actually paid by the taxpayer, then HMRC will raise an enquiry into the taxpayer’s affairs.
Don’t be fooled into thinking that those day trading profits (even if they don’t seem very much) will go undetected. Under self-assessment the responsibility for “creating the correct legal tax charge” is with the taxpayer. Meaning that it is not for HMRC to pursue a taxpayer before he/she has to file a tax return reporting earnings. The onus is on the taxpayer to calculate the tax due on unreported earnings and ensure that it is reported to HMRC. Please see the link to the HMRC website below for more information on the legal framework for self-assessment: