Quick FSA question

[Airthrey Capital]

If you are a full-time trader, and you set up a limited company, does the company need to be authorised by the FSA?

The company only trades its own capital, nobody else's, and does not offer any advice to anyone else.

Thanks

 

[JonnyT]

No definately not.

JonnyT

 

[TWI]

Only need to be registered if you are going to be managing client funds or offering investment advice.

 

[alpha_monkey]

No definately not.

JonnyT

Footnote:
I think the Inland Revenue sees an FSA registration as a rubber stamp of serious intent in trading related tax matters.

Does anyone know categorically how the IR treats trading income via a Ltd trading company without an FSA registration?

Confused

 

[Airthrey Capital]

Johnny T, T Walker.

Thanks for the swift response.

That is the answer I was suspecting.

The reason I asked was because, like alpha monkey, I had heard that the IR would not view your activities as a "professional trader" unless you were FSA registered.

Seems stupid, as there is no regulatory requirement to be FSA registered, to do so simply to satisfy the IR.

 

[TWI]

All it does is cost you 860 pounds+ VAT per year for individual FSA registration. Cannot see the point, although some clearer used to insist upon it but also used to foot the bill themselves. I do not think this is now the case.

 

[theknifemac]

Blairlogie

If you set up a limited company and make sure that the memo and articles mention trading then you should be fine. My accountant friend was of the opinion that it was unlikely that the IR would treat you as a professional trader / sole trade but would go down the CGT route unless you had a limited company.

He has a client who had been trading for some time as a ltd co and was getting FSA so he could handle clients.

Stew

 

[kevinburton]

Out of interest. What are the benefits of setting up a ltd company for trading activity? I understand that you can take dividends thus minimising NI contributions, but the company would be subject to corporation tax.

I just assumed it wasn't worth doing but maybe it is?????

Would be interested on your thought process if possible

 

[theknifemac]

Out of interest. What are the benefits of setting up a ltd company for trading activity? I understand that you can take dividends thus minimising NI contributions, but the company would be subject to corporation tax.

I just assumed it wasn't worth doing but maybe it is?????

Would be interested on your thought process if possible

Kevin think the main advantage is that you can offset costs (datafeeds, software, hardware etc) against profits before tax. It all depends on what your costs are - you have to take into account the cost of running a limited company.

Stew

 

[theknifemac]

Kevin think the main advantage is that you can offset costs (datafeeds, software, hardware etc) against profits before tax. It all depends on what your costs are - you have to take into account the cost of running a limited company.

Stew

Also it makes sure you are treated as trading for a living, so losses can be offset in following years. If trading as an individual you are more likely to be taxed through Capital Gains rather than income / NI from what I can tell.

Stew

 

[kevinburton]

Good points made, thanks

 

[ajanney]

You do not need to be Ltd Co, the revenue will treat you as a self employed trader if that is what you do for a living. Just like any other business you have expenses ie internet, datafeed,charts,commissions etc all of which are tax deductable. During your first 3 years self employment you can also claim back income tax previously paid if you make a loss, which you proberbly will. I know this is true because it has happened to me. It helps to have a good accountant well worth £250 they deal with the rev makes life much easier and they have never mentioned the FSA. Hope that helps

 

[kevinburton]

Thanks, very good points made

 

[nomish]

Setting up as an ltd with ur only ur own funds means ur profits will be double taxed (thats if ur making a profit above the tax free alowance).

I know the CGT has a different boundary level for individuals compared to companies but think of it like this.

You have all your turnover - costs = profit at the end of a financial year.

that profit will then be liable for corporation tax and then if u want access to that profit you will be taxed urself either through a receiving dividends from your own ltd company or through ur salary that u pay urself from ur own firm.

Like someone else said: being self-employed also allows u to write ur expenses off and then u dont have this tax issue.

 

[Rainmaker]

There is a whole can of worms about being a "closed investment company". I will elaborate if anyone is interested.

 

[theknifemac]

There is a whole can of worms about being a "closed investment company". I will elaborate if anyone is interested.

Go on then !

Stew

 

[STE1]

Please do. I'm interested.

 

[minx]

Yup, I'm interested too.......

 

[snake86]

There is a whole can of worms about being a "closed investment company". I will elaborate if anyone is interested.

Rainmaker,

I am trying to resurrect this thread as it will be quite useful for upcoming traders and people potentially interested in financial services.

It would be highly appreciated if you could elaborate on what is the can of worms (read: intricacies) for being a closed investment company.

Thanks,

Snake.

 

[One Eyed Shark]

Maybe cant go into all details that rainmaker implied, but significant issues for "closed investment co " and tax are :-

closed inv company under HMRC rules ( ie inv compamy controlled by 5 or fewer persons ) is liable for CGT on gains made from sale/ purchase of securities held.

so as already stated you will pay CGT first, corporation tax and then income tax........ some tax bill.

HMRC will grant exemption from CGT if not a close company ( i.e. 5 + ) also need to derive atleat 70 % of income from securities, and those shares are quoted on LSE, there are a few other criteria that dont spring to mind at the moment .......