Tax Consultancy Assignment
Understanding our client
Having spoken with you during our initial discussions, we will have gained a general understanding of how you approach your day trading activities and how your activities fit in with your personal circumstances.
To get a more detailed understanding of your activities we will send you an online questionnaire for you to complete. We won’t require you to send us details of your income and expenditure or any bank statements. Our questionnaire will ask questions such as:
- How many hours you spend trading;
- How often you trade and the frequency of transactions;
- The average length of time between opening and closing a trade; and other similar questions about your activities.
Technical tax research
This is where we get to the nitty gritty. We will review HMRC guidance and relevant tax case law in light of your specific circumstances. Our research will determine whether the way in which you carry out your day trading activities means that you are a private investor, a self-employed day trader or whether there is the possibility of your day trading activities are not taxable.
Personal Tax consultancy
All the work we have done together in establishing your tax status will be presented to you in a detailed report highlighting all references from HMRC guidance and tax case law. The report will state whether your day trading activities are that of a private investor liable to Capital Gains Tax or that or a self-employed individual liable to Income Tax. If there is a case for your day trading activities to be considered as speculative in nature and not taxable, we will discuss this with you further and decide whether a clearance application should be made to HMRC to ascertain whether they agree that your day trading profits are not taxable.
Once our work is complete you can use our report to confidently complete your tax return, knowing that you are reporting and paying the right amount of tax on your day trading profits. Should HMRC ever ask questions about your day trading activities you will have a robust assessment of your activities to back up how your day trading profits (or losses) have been reported.
As we don’t prepare tax returns in-house we can recommend partners who can prepare your tax return for you. However, any generalist tax adviser will be able to prepare your tax return on the basis of the assessment that we have carried out. Once we have determined whether you’re liable to Capital Gains Tax or Income Tax, it’s just a case of following the rules for each tax. The difficulty is in determining which tax a day trader is liable to in the first place.