For the past few years I have been trading futures in the UK. I trade as a limited company. As a limited company I have to be audited every year and in recent years I find that the audit fees are quite expensive. Although my profits and losses are small ( in the region of 10k to 20k) my auditors tell me that their fee is proportional to my turn over. As I'm sure Elite Trader members are aware turn over when trading futures can be very misleading. For example if I buy 4 lots of FTSE at say 5800 and sell them at 5815 my profit will be £600 but my turnover is £232,000. So if I do this 3 or 4 times a day my turn over would be over a million a day or nearly 300 million a year which is very misleading. My profit and loss for the year may be around 15000 a year and sometimes out of that I have to pay between three to four thousand pounds audit fee. This is because the audit fee is based on a turnover of 300 million pounds My auditors tell me that this is the only basis that they know on which limited company fees can be based. I think most auditors are perhaps not familiar with the futures market and I am not sure if this advice is correct. I would be grateful if any one knows a different way that a limited company engaged in futures trading can be audited so that fees are not based on turnover only.
It seems like you are better off being taxed on the basis of capital gains. You get a £10k allowance and then initially pay only 18% if this is your sole income.
The company has some losses carried forward from the first couple of years of trading which I would like to be able to carry forward. This is why I still wish to continue to trade through the company. The question is can I find audit fees which are cheaper than what I pay already and not dependent on turn over.
Ditch the company, register as a small business sole proprietor(GIF Property Maintenance ) That way you can claim expenses on car payments fuel and repairs even on a pencil that you bought. You can also carry forward any losses and you dont need to be audited. Trading is just part of the business. Mow your neighbors lawn and invoice him and your business is legitimate.
You don't need an audit. Your turnover is your revenues, which is your P&L before expenses, NOT the notional turnover of the derivatives. So you are well below the audit threshold in the UK. I traded via a company in the UK for a decade and was even audited once by the tax authorities, and I NEVER had to submit a normal accountancy audit. If my accounting treatment was ok for my accountant (a central london mid-sized firm) and for the Inland Revenue, then it is ok for someone trading much smaller. You are being overcharged and should find an accountancy firm that understands financial trading. You may even have a case to sue them, but it probably won't be economical to do so. Bottom line - your auditors are either mistaken (most likely), or cyclical rip-off merchants. In either case, you need to change to another firm. N.B. Audit threshold is £6.5 million annual turnover (i.e. P&L before expenses), or £3.26 million in assets. You have some way to go before you fall into that category.
Thank you for your reply. I would be grateful if you would be able to give me the name of an auditing compnay in the UK who is familiar with the auditing of a compnay engaged in derivateive trading. My auditor's definition of turnover appears to be the notional turnover to which you refer to. If you are unalbe to give me the name of a company perhaps you would be kind enough to guide me on how to establish with companies' house whether my turnover is my revenues or notional turnover. Many thanks
No, but i would make the point that your situation is similar to someone working on comission. Imagine a sales agent selling a risk life insurane for 250.000 euro (pays only on death etc. - no savings part). You get those REALLY cheap. An agent selling one per day does NOT get put at the nominal value as revenue, but only on his comission. Or imagine ebay. They get a sales fee as part of the price. I tihnk only an idiot would assume their revenue is the whole sales price of the goods. I would argue that all that needs auditing is the certified PNL statement. That your turnover is in fact the income you make ONLY. I would jsut start calling auditors around the place. My auditor (not UK) just looks at the PNL and puts the whole profit / loss for the month into the account as one line per fee type (pnl, broker comission, nfa comission, data fees deducted from account all one line). Basically treading it like a comission assignment from another company We got tax audited here regularly (something funny about my balances regarding to VAT always having hugh reclamations and never income raising a warning flag) and never got a complain from the government. I seriously think this is a better way to look at it. If that does not work, it could be done daily... similar to the accountant not entering the whole cash registers in shops but just sales totals. Anyhow, start auditor shopping. Pick up the phone, and call accountants.