Wow, this is very helpful. If 'likes' are the currency of gratitude, I am afraid I have no choice but to underpay you here . Your script certainly provides an incredible amount of detail, but I suppose you can never be too transparent with good old HMRC. Just wondering if you are running this script on your own stored data or is it parsing some downloadable broker report on trades executed? I know for example Interactive Brokers provide summary trade reports but clearly not to the level of explanatory detail you have provided - I am trying to figure out all the dependables for developing a similar program to do something like this for me going forward. Also I presume your program handles any interest accrued on cash or bonds separately?
It's based on the IB activity report. This actually does give you all the info you need, but obviously you have to do the calculations yourself. For interest and dividends (which are taxed as income so seperately from CGT) I ignore accruals, and just put cash receipts into my tax form. These don't have to be itemized. GAT
Done some further digging and the IB flexreports I have found (trades) report gains on a FIFO basis. I guess there is some work to do in aligning the calcs with UK section 104 as you have done. I hope you don't mind a couple of follow-up Qs: I assume your report uses average pooled cost basis throughout and would the tax report on buybacks on short positions mirror the extract you have shown but in reverse?
GAT, just to be clear, I was trying to find an easy way to match up the entries and exits but the closest I got was the flexreport mentioned which uses fifo accounting. The activity report you mentioned is more comprehensive but will be little more daunting when parsing into the format you have created.
Ken, UK CGT doesn't use FIFO, it's a lot more complicated than that. The flexreport is no use, I use the trade by trade data from the standard activity report. See here. Here's the key part: "When you dispose of shares you cannot work out your capital gain or loss until you have matched the shares disposed of with shares you acquired. You’re treated as disposing of shares in the following order: Description First Shares acquired on the same day as the disposal (the ‘same day’ rule). Second Shares acquired in the 30 days following the day of disposal (the ‘bed and breakfasting’ rule) provided the person making the disposal was resident in the UK at the time of the acquisition. Third Shares in the Section 104 holding." Since we're going long and short futures we can replace the word 'share' with futures position, and replace 'acquire' with open a position and 'disposal' with close a position. So it doesn't matter if we've gone long or short, when we open a new position we're always 'acquiring' a position. (The actual law refers to 'securities' not shares. A short in a future is a security, as is a long in a future. Long/short is irrelevant for futures). Section 104 is basically a pooled cost. But as you can see, that only applies if the other two terms don't apply. So if I close a US 10 year long (or short) today then the matching acquisition could be a trade from today (if I opened a US 10 year today, even if that trade was done before the other one), or a trade in the following month, or a pooled cost. Or some combination from the three. It's insanely complicated. I couldn't imagine doing it without writing code for it. I'm very happy to provide the code (described here but since updated) if you think you can make use of it. GAT
Gosh, it is insanely complicated . Love the blog post, very clear. If you are ok sharing code, I know a bit of Python so I could make use of it. How do I repay you, though ?
Well it's already open source https://github.com/robcarver17/python-uk-trading-tax-calculator/tree/master .... I hadn't actually updated the code for many years, although my local copy I have been updating. I just did some tidying up and it seems to run okay with the provided example files. You can: - buy all my books if you haven't already done so - leave nice amazon reviews for said books - buy me a drink if we ever meet in person GAT
When I traded futures it was mostly a loss! I just reported simple profit and loss but as an options tarder I pay income tax- you can only pay CGT if it's not your main income AFAIK, and it's taxed at 40% over a low threshold
Main source of income is only a minor indicator to whether you should be classed as a self employed trader. You are not a market maker or arbitrager, or an ex floor trader or ex bank dealer. You are an amateur part time options speculator by the looks of things. I think you should be paying CGT like Mr Manzur here: Manzur Mr Manzur was a retired surgeon. He used his own savings to begin acquiring stocks and shares. He made between 240 and 300 trades in a year using an online stockbroker. Some of the shares were turned over very quickly but others were retained for six months or more. The tribunal held that Mr Manzur’s buying and selling amounted to the management of a portfolio of investments rather than trading. They upheld the view in Salt v Chamberlain that the badges of trade were of limited value and said there was no definitive checklist which could be used to say whether someone was trading or not. The number and frequency of transactions, and the short-term nature of the holdings alone did not establish trading. Other factors taken into account were: the time spent on the activity (about two hours a day); the fact that Mr Manzur did not entirely rely on his own expertise but used the advice of brokers; that the activities were not characteristic of established share dealers, for example Mr Manzur had no customers and was dependent on market movements alone to make a profit. https://www.gov.uk/hmrc-internal-manuals/business-income-manual/bim56860 One last thing if you ask you local Accountant if you should be paying income tax or CGT because you speculate full time or its your main source of income . 99% of the time he will say you must pay income tax rather than CGT to cover his own ass.