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Share dealing is this a trade

My client shas been dealing in shares for two years. Profits first year losses second. The Revenue contend the trading falls under Capital Gains Tax, per case of Salt v Chamberlain. I am arguing that the share dealings are a trade. Do you know of any case or Commissioners meetings finding, for the shares to be treated as a trade.
John Owens


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10th May 2002 11:06

Wannell v Rothwell
Individual was held to be trading in shares in Wannell v Rothwell (1996), but loss relief was refused because the trading was "uncommercial" (later than Salt v Chamberlain).

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14th May 2002 09:46

Share trading
If Sch D treatment is desired, then it may be more easy to argue for this if the client has specifically acquired a computer, subscribes to a realtime share price/information service etc and generally approaches it as a business. How long does he/she spend on this activity each day/week doing research etc?

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10th May 2002 11:23

what was actually done in the first year?

It is not clear from the original message whether the first year profits were taxed under DI or under CGT rules. It it was taxed under DI then the Inland Revenue are obliged to have the same treatment for the second and subsequent years unless full disclosures were not made in the first year.

Has the client taken all reasonable steps to notify the Inland Revenue of trade being commenced? This should have been done within 3 months of trade commencing.

At the end of the day, if the client was not sure whether this is a capital gains matter or Income Tax then you can't blame the IR for following the CGT line.

All the evidence suggest that this is a CGT matter unless the client has taken all steps to register as a trader. Losses under CGT are carried forward and utilised in the best possible manner preserving the annual exemptions.

Hope this helps.

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10th May 2002 11:32

Wannell v Rothwell

Mr Porter raises an interesting point. Wannell was trading in commodities and made losses. The decision was that he was close to the border line of what constituted a trade and the lack of commerciality is what sunk it. In the case of John's client there were profits in the first year so there is evidence of commerciality and this could be worth a go. You could also mention Cooper v C J Clark Ltd 1982.

The points made by Messrs Tanna nad Riley need thinking about too. Is the client liable to the £100 penalty for failing to register for Class 2 NICs?

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10th May 2002 12:15

Be Gentle

Be gentle with a learned student who does not mention "football".

Allow i do admit i learn more from you guys than my inhouse mentor.

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09th May 2002 16:39

Told you

See, John, I told you this was a good place.
Sadly they don't pay commission to people who sign up new members.

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09th May 2002 23:01

Why do you want it classed as a trade ?
OK so you want to claim loss relief but presumably your client hopes to make a profit in the long term. By having it classed as a capital gain/loss he/she gets any long term profit £7,500 pa tax free and can carry forward any losses to set off against this.

Also, if he/she makes a profit over £4,615 there could be a class 4 NIC liability if it's classed as a trade.

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09th May 2002 14:15

text book quote
"trade includes every trade, manufacture, adventure or concern in the nature of trade".

"taxpayer was held to be trading on the evidence of over 200 stock exchange sales and purchase over a period of three years"

"Director of a spinning co was engaged in buying shares of mill owning co's and then asset stripping. One trans might have been capital but when he done this four times he was held to be trading".

Sorry i don't know the names of the cases but you should be able to do a search of the cases relating to that provision in the act.

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