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Day Trading and how to account for it?

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Okay, please bear with me here as I'm not too good at writing forum posts for some reason.

I run a small limited company (welding & fabrication) and make just enough to live on and a bit for a rainy day. For the last 4 year I've been day trading profitably and this has supplemented my income and have declared any earnings from day trading through self assessment. I don't know if it matters but I trade currencies, cryptocurrencies and occasionally stocks & shares. I don't make a lot out of it but it does supplement my income.

This is where things have become complicated for me, today I was having a discussion with somebody online who suggested that I should also be declaring the turnover of my trades rather than just any income I receive from trading. Today I went through all my trades for the last 12 months and the turnover was just over £450'000 before trading fees. One thing that was brought up in the conversation was that if I was to have a tax investigation from HMRC there would be a lot of akward questions regarding where this extra income was coming from and there would be possible implications as I've never declared the turnover from trading or the value/details of each trade.

Would anybody be able to shed any light on whether turnover should also be declared?

What about the value of each trade and how exactly should it be declared?

If I should be declaring the value of each trade then is there any accounting software you would recommend for this?

I genuinely didn't realise the total turnover was as high as it was (it's something I've never considered at any point in the past) and this is a good bit more than the VAT threshold, should I be registered for VAT for day trading although the current profits wouldn't cover VAT on the value of the turnover as the profit margin is not that high. 

Would there be any benefit to trading as my limited company rather than as a sole trader? My limited company is VAT registered (although under the threshold) and how would this impact the company for tax purposes. Admittedly, having an extra 450k on the companies turnover would look impressive but it is almost 10 times the current turnover and I'm aware this would likely have tax implications.

If there's any advice that could be offered it would be greatly appreciated. I now realise that this is something I should have been taking advice on long before now.

Replies (6)

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By lionofludesch
05th Apr 2020 21:41

Many DIY accountants confuse their company with themselves and are unable to distinguish between meum and teum.

So before we set off on the wrong track, in whose name are these trading transactions? Yours? Or the company's?

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By Jock
05th Apr 2020 22:56

Thanks for the prompt reply.

Company money has never been used for trading, it's always been personal money only and all trading accounts are registered in my name as an individual.

I don't know if it matters but thought that I should probably add that while I've always thought of it as a day trading, only 80% of trades were fulfilled in the same working day, I took about 20% of trades anywhere from a few days to a few weeks depending on various things and about half of the profit is reinvested.

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Replying to Jock:
By lionofludesch
05th Apr 2020 22:58

Jock wrote:

Thanks for the prompt reply.

Company money has never been used for trading, it's always been personal money only.

I take it that means the transactions were in your own name. Whose money it was is irrelevant. Nothing to stop you lending money to the company and doing the deals in the company's name

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Hallerud at Easter
06th Apr 2020 08:52

Question 1 is determine whether it is income rather than capital gains, my money is on the latter.

As a starter some guidance on cryptoassets.

I would arrange to talk with an accountant who can advise re the various types of transactions you execute and how the rules re tax work with each.

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By Duggimon
06th Apr 2020 09:16

HMRC's position on cryptocurrencies is that it's almost always treated as capital rather than trading, which is a more beneficial treatment for you so I wouldn't seek to argue with them.

Cryptocurrencies are an absolute pain to deal with on a large scale because so many of them only have price information in USD meaning there's often two currency translations per transaction and there can be hundreds, or even thousands of transactions.

I would suggest seeking the advice of an accountant who understands the rules around cryptocurrency trading and is able to help with the tax returns required because I doubt this is something you could manage correctly on your own. If you retain any significant holdings in cryptocurrencies, they will be able to advise on an extraction strategy to minimise your taxable gains.

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By Matrix
06th Apr 2020 09:20

How are you currently treating it on your self assessment? Surely you would need the turnover to complete the self employment page?

I would get specialist advice based on your circumstances and not take advice from an online forum. (But I expect there is no VAT as an exempt supply.)

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