Prop Trading as LTD company UK (VAT Applicable)

Trading Discussion Trading Lifestyle
1

Hi guys,

Obviously I’ll be looking to speak to an accountant if I go down this road, but I wondered if anyone has experience here.

I am looking at potentially joining the 5%ers at some point once I am confident in my DD and sustainability of my strategy.

I was trying to figure out the best structure for tax, as a prop trader I believe CTG does not apply, as you are not disposing of your own assets.
So you would be looking at income as a payment for contract services.

Declaring Self Employment on it, and adding it to the personal tax return would give me a tax burden of over 40% on all of it, however as a LTD company I believe you’d be looking at VAT on income over £83,500 annually.
Does anyone know if Prop Trading income is VAT applicable?

Cheers, Chris

2

That’s not quite how it works - VAT is applicable on ALL turnover IF you Register - but below the threshold (you say £83,500) you do not HAVE to register and if you’re not registered you do not charge VAT (unless you’re being fraudulent)

Turnover is not the same as Income - since turnover includes expenses = so if you buy an item for £100 and sell it for £110 your Income is £10 - but your turnover is £110

However I can’t really answer your specific question as I’m not sure what a PROP is ! and whether they are VAT applicable ! :slightly_smiling_face:

3

yea I meant you’d have to register for VAT once income is over 83,500 (or whatever the level is now).

I used to have 2 ltd companies. one for online sales, the other for contracting offshore.

I didn’t have to charge VAT on the contracting as it was over 15miles from shore, but had to on the online sales one.

We were turning over in excess of £20,000 per month and charged VAT on all sales.

I was hoping someone would know Regards the Prop firms.

cheers

4

What’s a "Prop Firm " ?

5

Proprietary trading.

You trade with their cash, and split the profits.

6

Then why not say so ?

How exactly do you “Split the losses” - when you lose ?

I don’t think anyone here does it - although I have seen a few threads where people were talking about that principle - but mainly they died PDQ when the small print was investigated.

And of course there are not that many here who even know what VAT is !

7

Dependent on the firm, but most have a draw down limit then you get removed from the scheme, your account getting gets closed

They are taking the risk of losses, but only to a point.

8

What I don’t understand is why a few traders go in for prop firms when they can be individual traders and have brokers to help at each level.

9

the brokers don’t give you their money to trade with and split the profits

10

If you hit the limit in a 12 month period, around 85k, then yes you have to be vat registered. Because it’s sale of goods or services. These prop firms treat you as a contractor and pay for your services.

12

The question was about VAT mate

13

@chrisfraser05

You might be able to get on the flat rate scheme if your under £150k which would reduce your VAT liability.

I used to be on the flat rate scheme about 4 years ago so the figures might have changed slightly.

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14

yea, I think I need to sit down with an accountant before signing with a firm and see what the score is.

My issue is i don’t need to make much from a firm over my salary to hit the 50% tax bracket so will be losing so much of my income from a firm.

But if I go ltd and a firm wont pay me the VAT, then I lose the same anyway!!!

15

Im not too sure about 5%ers T&Cs.

But FTMO are VAT registered, and their T&Cs say that all payments are inclusive of tax.

So the way I see it is, if you invoice for £5k for the month, then just over £1k would go to the VAT man which sucks but…

Your taxable profits will reduce anyway therefore reducing your personal tax liability so it should balance out I guess.

But yeah, your accountant will be able to clear it all up.

Its a problem im hoping to have shortly :joy:

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16

The firm wont pay vat but you can still include it in your invoice. So if you’re in the flat rate you can charge 20% but you pay less to the government so you get more than you would.

If you give approximate numbers of your situation then we could advise you more specifically. But there are ways around it, just requires a bit of creativity.

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