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

Challenge to Will's Validity Rejected by High Court

12th April, 2024 By

The best way to ensure your assets will be distributed as you wish is to have your will professionally drafted by a qualified solicitor. In a recent case, a challenge to the validity of an elderly man's will was dismissed by the High Court. The man had previously made a will in 2011, leaving most of his estate equally to his three children. In 2018, by which time one of his sons had predeceased him, he made a further will, leaving the residue of his estate to his other son...

Defiance of Family Court Orders Will Always End Badly

10th April, 2024 By

Custodial sentences very rarely come into play in the family courts. Where there have been repeated breaches of court orders, however, judges may have little choice but to clamp down. This was illustrated in the High Court during committal proceedings that stemmed from a child custody dispute. The background to the case involved contested proceedings between the father and mother of a young child. These concluded with a court order establishing that the child – a daughter – would live with the mother. Three months later the daughter travelled with...

Claim for SDLT Relief on Annex Unsuccessful

8th April, 2024 By

When buying a property consisting of more than one residence, it may be possible to claim multiple dwellings relief (MDR) against Stamp Duty Land Tax (SDLT). However, there are certain conditions that must be met for an MDR claim to succeed, as a recent case illustrates. A property was purchased for £1.8 million. Prior to the purchase, the buyer had agreed with the seller that he would be allowed to carry out works to construct a self-contained annex at the property. The buyer's SDLT return included a claim for MDR...

Divorce – Alleged Bigamy Raised in Financial Remedies Dispute

5th April, 2024 By

The issue of bigamy and its potential impact on a person's ability to seek financial remedies in a divorce came under the legal spotlight recently. A husband made an application to strike out his wife's financial remedies claim on the basis that she had committed bigamy and deceived him into a marriage when she knew she was not free to marry. This deceit, he claimed, was so egregious that, as a matter of public policy, she should be debarred from pursuing any claim for financial remedies against him. The husband based...