fbpx

Can Managing Your Personal Share Portfolio be a Trade for Tax Purposes?

12th May 2023 By

With widely differing degrees of success, many enthusiastic investors buy and sell shares on their own account in the hope of boosting their incomes – but can such activities be viewed as a ‘trade’ for tax purposes? The First-tier Tribunal (FTT) addressed that issue in a case of importance to private investors.

After receiving a large inheritance, a man retired from his professional job and used part of the money to buy and sell shares on an ‘execution only’ basis. He had access to a live feed of share prices and kept up with the financial news, also carrying out further research in the hope of picking winning investments. During a three-year period, however, his efforts produced overall losses.

He asserted that those losses were incurred in the course of trade and sought to deduct them, for tax purposes, from his other income during the relevant period. HM Revenue and Customs, however, did not accept that he was entitled to any such deduction. It asserted that his share dealing activities did not amount to a trade, within the meaning of Section 64 of the Income Tax Act 2007.

Ruling on his challenge to that outcome, the FTT noted that his ambition to generate sufficient income from his share dealing to meet his outgoings sadly came to naught. He was not a registered or regulated trader and did not buy or sell shares on behalf of third parties. He would make phone or email contact with a broker who would perform trades in accordance with his instructions.

He bought and sold shares at an average rate of a little over once a week during the relevant period and estimated that he spent one or two hours a day on activities connected to share dealing. He did not follow a specific pattern of work across the week and the FTT noted that his approach to investment was not particularly organised, systematic or effective.

Rejecting his appeal, the FTT found that he had not seriously planned or considered his share dealing in a way that would be expected of someone engaged in a trade or business. He did not devote the majority of his time to investment activities, instead fitting them in around other things he wanted to do. In managing a portfolio of personal investments, he was not undertaking a trade.

Source: Concious

Latest News

Tenants Can Purchase Freehold When Landlord Cannot Be Found

11th June, 2024 By

The Leasehold Reform, Housing and Urban Development Act 1993 gives qualifying leaseholders the right to join together to buy the freehold of their properties – a process known as collective enfranchisement. A recent case demonstrated that this right can be exercised even when the landlord cannot be found. The leaseholders of two flats in a terraced house wished to purchase it from the landlord, but were unable to ascertain his whereabouts and therefore could not serve notice on him under Section 13 of the Act. They therefore applied for an...

Court Refuses to Set Aside Divorce Order Applied for by Mistake

6th June, 2024 By

While the courts have a range of powers to set aside orders, they will only exercise them in limited circumstances. In a somewhat surprising case that has attracted much comment, the High Court declined to set aside a final order of divorce that had been applied for by mistake. A couple separated in January 2023, after more than 21 years of marriage. In October that year, while financial remedy proceedings were still ongoing, the wife's legal representatives inadvertently applied for a final order of divorce in respect of her instead...

Waiting Time for Grants of Probate Falls

3rd June, 2024 By

Following concerns last year about delays in processing probate applications, recent figures from HM Courts and Tribunals Service show that waiting times for grants of probate are continuing to improve. The average time from submission of a probate application to probate being granted fell to 11.3 weeks in March 2024, a decrease from 13.7 weeks in February and 13.8 weeks in January. This is the lowest figure since March 2023, when the average was 10.8 weeks. The longest waiting time since then was in November, at 15.8 weeks: that month,...

Late Appeal Against Tax Penalties Rejected

31st May, 2024 By

It is incumbent on taxpayers to make sure they fully comply with their obligations to file returns and pay any tax due. The point was illustrated by a recent case in which a taxpayer whose return had not been received by HM Revenue and Customs (HMRC) failed to persuade the First-tier Tribunal (FTT) that he should be permitted to appeal against the resulting penalties. On the evening of 31 January 2014, the man had completed his 2012/13 Income Tax return on HMRC's website. Shortly afterwards he went to Cyprus, and...