Starting an investment company?

[tradegreek]

Hi I was wondering if anyone has any experience in starting an investment business.

I trade mostly US stock options but I also trade the underlying stocks too occasionally although I am UK based. I have made very good returns for a while now I reinvest the majority of the capital to grow my "fund" faster as a result I am looking to make it more tax efficient and believe that trading as a ltd company may be more effective. I was wondering if anyone has any experience of this or can point me in the direction of a tax accountant that has experience in this area.

Best.

 

[1nvest]

Hi I was wondering if anyone has any experience in starting an investment business.

I trade mostly US stock options but I also trade the underlying stocks too occasionally although I am UK based. I have made very good returns for a while now I reinvest the majority of the capital to grow my "fund" faster as a result I am looking to make it more tax efficient and believe that trading as a ltd company may be more effective. I was wondering if anyone has any experience of this or can point me in the direction of a tax accountant that has experience in this area.

Best.

Its actually less tax efficient if you create a company.
As an individual you have certain allowances such as a capital gains tax allowance. you don't as a corporation
you also have tax efficient investment vehicles such as an ISAs and SIPP again here of course you have an annual threshold of how much to invest in, however from then on its tax free.
There are issues with a SIPP as you can only use it as a pension fund, so you cant simply draw from it whenever you like
these days, corporation and income tax (or even using a company to pay yourself dividends) has changed significantly over the last few years making the prospect of a corporation, with its own administrative burdens, more and more less of an option for many

the acid test will be precisely how much you are making. im happy to give you an idea of how much you make. im not a tax accountant, but for your purposes its not that difficult to ascertain where your money might better lie

 

[tradegreek]

Its actually less tax efficient if you create a company.
As an individual you have certain allowances such as a capital gains tax allowance. you don't as a corporation
you also have tax efficient investment vehicles such as an ISAs and SIPP again here of course you have an annual threshold of how much to invest in, however from then on its tax free.
There are issues with a SIPP as you can only use it as a pension fund, so you cant simply draw from it whenever you like
these days, corporation and income tax (or even using a company to pay yourself dividends) has changed significantly over the last few years making the prospect of a corporation, with its own administrative burdens, more and more less of an option for many

the acid test will be precisely how much you are making. im happy to give you an idea of how much you make. im not a tax accountant, but for your purposes its not that difficult to ascertain where your money might better lie

Thanks for the detailed reply, im guessing my understanding is a bit out of wack as I thought the capital gains would just be charged at corporation tax from what I have read so far. Most of my holdings are weekly to monthly. I make roughly 4-8% on average a week in terms of returns on aum of around 500k (currently) which I reinvest with an average sharpe ratio of around 3.2. I do subsequently have ISA's which are maxed out and do not form part of my 500k "fund".

Just a side note which may be relevant this has become my full time job wether it is the trading (I usually make trades every day) or the data analysis, model building data collection etc which supports the trading side.

 

[1nvest]

Thanks for the detailed reply, im guessing my understanding is a bit out of wack as I thought the capital gains would just be charged at corporation tax from what I have read so far. Most of my holdings are weekly to monthly. I make roughly 4-8% on average a week in terms of returns on aum of around 500k (currently) which I reinvest with an average sharpe ratio of around 3.2. I do subsequently have ISA's which are maxed out and do not form part of my 500k "fund".

Just a side note which may be relevant this has become my full time job wether it is the trading (I usually make trades every day) or the data analysis, model building data collection etc which supports the trading side.

indeed, capital gains is in effect simply corporation tax. therefore there is no (personal) allowance
for a 500k fund though and making 5% a week, so you're earning 25k per week a personal allowance of 12k is hardly of any concern. what would be the concern is how you to intend to now pay yourself.
i said earlier you wouldnt need a tax accountant. but i dont earn 25k per week, not even my pension makes a return of 4-8% per week. you really are best seeking a tax accountant. you will still have the same issues, wherein your dividend is going to take you past the point of any difference in coporation tax vs income tax. the issue you have to face is where to launder all that money and im not best placed.
normally i deal with high income rather than high net worth. your stinking rich mate!

 

[tradegreek]

indeed, capital gains is in effect simply corporation tax. therefore there is no (personal) allowance
for a 500k fund though and making 5% a week, so you're earning 25k per week a personal allowance of 12k is hardly of any concern. what would be the concern is how you to intend to now pay yourself.
i said earlier you wouldnt need a tax accountant. but i dont earn 25k per week, not even my pension makes a return of 4-8% per week. you really are best seeking a tax accountant. you will still have the same issues, wherein your dividend is going to take you past the point of any difference in coporation tax vs income tax. the issue you have to face is where to launder all that money and im not best placed.
normally i deal with high income rather than high net worth. your stinking rich mate!

would any tax accountant do or do I need one that specializes in trading? In terms of a salary, I was thinking of just paying myself periodically through dividends. The issue is more about the reinvestment of capital being taxed at a lower amount I don't really mind paying tax on distributions I just want to allow the capital account to grow. Thanks for the help!

 

[1nvest]

would any tax accountant do or do I need one that specializes in trading? In terms of a salary, I was thinking of just paying myself periodically through dividends. The issue is more about the reinvestment of capital being taxed at a lower amount I don't really mind paying tax on distributions I just want to allow the capital account to grow. Thanks for the help!

any tax accountant. dividend payments are no longer as tax efficient as they used to be.
the main tax considerations will be how you trade (spreadbetting for example is still tax free), where you are domiciled. if you earn that much you can legitimately afford to live in far more effective tax regimes and how old you are, and spouces/children (utilising their allowances, and any inheritance)

and then also worth mentioning is if you set up as a corporation, then didnt pay everything through dividends and then as you say, let the capital grow you would be eligible to wind up the company (eventually in the future) for a far far smaller percentage. i think its 10%..but yet again, when its paid to you, it gets taxed again via your income tax
HMRC unfortunately have you by the balls whichever way you have it.

and of course still make sure you are spreading your risk to different brokers..

talk it all though with someone well qualified. and with your income, go for the very best.

 

[ironjaw]

For someone that is interested in starting trading through a ltd company, can you share your experience in setup and services, brokers, etc. How do sign the W-8BEN form for the company, personally? I'm more interested in the practical aspects as how to?

 

[sideways-sid]

With thesums and returns involved @tradegreek , it could be worthwhile considering offshore options, which might better meet your requirements.

 

[ARBinstruktor]

any tax accountant. dividend payments are no longer as tax efficient as they used to be.
the main tax considerations will be how you trade (spreadbetting for example is still tax free), where you are domiciled. if you earn that much you can legitimately afford to live in far more effective tax regimes and how old you are, and spouces/children (utilising their allowances, and any inheritance)

and then also worth mentioning is if you set up as a corporation, then didnt pay everything through dividends and then as you say, let the capital grow you would be eligible to wind up the company (eventually in the future) for a far far smaller percentage. i think its 10%..but yet again, when its paid to you, it gets taxed again via your income tax
HMRC unfortunately have you by the balls whichever way you have it.

and of course still make sure you are spreading your risk to different brokers..

talk it all though with someone well qualified. and with your income, go for the very best.

This context generates an ODD IDEA in my brain:

Putting the real trading into the Ltd. But paying no dividends! Instead running a private tax free SB-account, and placing opposite trades in the company and private account. With some time and knowledge (I could help!) you should manage to
generate the tax active losses in the company account and harvest the tax free profits in the SB account. It is a game of percentage points depending on the tax brackets involved.

This is only a crutch, in case you really can only generate your profits with US options and not with spread bet options.

happy spreading

 

[sideways-sid]

For someone that is interested in starting trading through a ltd company, can you share your experience in setup and services, brokers, etc. How do sign the W-8BEN form for the company, personally? I'm more interested in the practical aspects as how to?

Set-up and service is identical doing so as an individual. Just more expensive.

With IB for example, you sign the W-8BEN as a representative of the company in the same way (using the same online form) as you sign for one personally.

 

[jonfuentesx]

You can open a crypto fund in synthetix for 200 dollars (the cost of the smart contract) and borrow usd offering as collateral the cryptocurrencies you have in the fund. You don't pay taxes.

 

[FerarriBit]

When choosing a cryptocurrency, I first of all pay attention to its rating on the website, which I got access to after taking a financial course. The main thing is to have more than 5 cryptocurrencies in my portfolio.

 

[Farm Yard Forex]

The sheer amount of red tape and hoops to jump through to do that in the UK puts me off.

 

[Jungletrader]

Oh man the idea is great but here in Ireland the red tape too would simply melt one's head and fees consulting would coat you but best of luck

 

[progix]

When choosing a cryptocurrency, I first of all pay attention to its rating on the website, which I got access to after taking a financial course. The main thing is to have more than 5 cryptocurrencies in my portfolio.

We should take risk for what we at least know about so its a good idea to learn about new investment avenues and how they works. I am pretty much obliged with sticking to forex trading which i have learned while spending a lot of time so i am happy sticking with it for now.

 

[ffsear]

Hi I was wondering if anyone has any experience in starting an investment business.

I trade mostly US stock options but I also trade the underlying stocks too occasionally although I am UK based. I have made very good returns for a while now I reinvest the majority of the capital to grow my "fund" faster as a result I am looking to make it more tax efficient and believe that trading as a ltd company may be more effective. I was wondering if anyone has any experience of this or can point me in the direction of a tax accountant that has experience in this area.

Best.

Who do you use to trade US stock option in the UK?