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Tony Tax
Tony Tax, Tax Consultant
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My father invested into a fx-forex trading company account

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My father invested into a fx-forex trading company account a few years ago. The original fund was sent to a Swiss bank account in their company name. He receives a monthly statement of trades opened and closed and a profit and loss based on what can be measured minus the open trades when the statement is generated, the account is completely managed by this Swiss company and trader. Generally the trades are opened and closed within hours, stop loss controls are used to stop bad trades getting worse and when achieved protect profits. I have heard the term(spread betting) used by this form of trading however unsure if this claim is correct for this type of trading, the trades are made in speculation of a long or short position against a currency pairs, each trade placed will speculate against the value of each pair and the prediction against each pair either long or short means you either make or loose money. The whole account is traded on its whole value on leverage but a fixed leverage is always used. The access to the funds are only by quarterly requests and only if the account being traded has not got open trades that are negative that value-greater than 50% of the whole account. My question is the profits made, are they taxable or are they except of tax given the variables above and the method money is made here, if they are taxable what tax would be applied taking into account the funds are only accessible at limited times and under certain conditions..? And if this is taxable when should this tax be paid as funds are not very assessable..,!

Great question for a Friday night but one I hope you can help us with.

Colin.
Submitted: 1 year ago.
Category: UK Tax
Expert:  Tony Tax replied 1 year ago.
Hi.

Your father isn't trading the fund himself so he won't pay income tax on profits. The net profits made in a tax year will be subject to Capital Gains Tax unless they are made through a spread betting account in which case they will be exempt from tax altogether.

Currency gains are taxable unless they are made from money exchanged into another currency for domestic use, eg a holiday or a business trip. They are no different to gains made on shares or property. Currency losses are deductible from other gains to arrive at the net gain or loss for the tax year unless they are losses made in a spread betting account in which case they are ineffective for CGT purposes.

The company your father's account is held and traded by will tell you if it is a spread betting account which I doubt.

Take a look here for more information on the tax treatment of currency gains.

I hope this helps but let me know if you have any further questions.
Customer: replied 1 year ago.
Thank you for your reply, a clear answer to understand, as it would appear the profits made from this source are subject to CGT how would the tax due be paid given the funds are not readily available within each financial year..?, the funds will only be made available when funds are transferred and have landed into his account as this is how his funds are managed,, it would seem extremely unfair to have tax profits within the financial year when you can not draw funds out to pay the tax due.?given how this works would it therefor be acceptable to pay due tax when funds land into his bank account as then this could be realised profits and actual funds that can pay the tax due, your advise here would be greatly appreciated.

Kind regards

Colin
Expert:  Tony Tax replied 1 year ago.

Your father will need to register for self-assessment to disclose his gains and losses. He can do that using a form SA1. Read about capital gains and tax returns here.

Capital Gains Tax is payable on 31 January following the end of the tax year in which the liability arose. The tax year ends on 5 April so I would have thought that ten months is sufficient time to arrange to have the funds available to settle any tax liability.

Tony Tax, Tax Consultant
Category: UK Tax
Satisfied Customers: 14059
Experience: Inc Tax, CGT, Corp Tax, IHT, VAT.
Tony Tax and 6 other UK Tax Specialists are ready to help you

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