Manncoin

[trmpton]

60 percent in a week on revolut which is easy to pull money back out of in a well established crypto.  

[John Wright]

51 minutes ago, Aislinn said:

Aren't all investments with the intent to make a profit?

Are you saying that the Jersey guidance isn't relevant here? When it says, "If you are just buying and selling for yourself with your own money it is unlikely that you are trading.", I'm pretty sure they're referring to the word trade in regards to whether the profit is liable for income tax or not (and not the financial "trader" meaning of the word)

As I've said, and Philip Dearden, there’s no actual definition of trade. The test applied is intention and that is frequently gauged by frequency/volume.

You are confusing a person conducting trades on their own account with trader. 

The Jersey guidance is just that, guidance. Someone buying and selling a few parcels of shares or going in and out of crypto, or swapping crypto every month on their own account isn’t trading, they’re tax free capital gains or losses. But daily, and in large volumes, the profit is treated as income, and is taxable. It’s a matter of degree.

Buy a house a year, do it up, live in it, sell it on, capital gain and tax free, even in UK. Buy one a month, do up quickly, sell on its looking like a business the profit from which is taxable.

[Aislinn]

2 hours ago, John Wright said:

You are confusing a person conducting trades on their own account with trader. 

Respectfully, what have I said that makes you so sure about this? You've repeated this twice now so I assume I came across incorrectly somewhere.

 

2 hours ago, John Wright said:

The Jersey guidance is just that, guidance.

So I take it your extrapolation from the tax law of flipping houses trumps a document published by government?
We're trying to determine whether trmpton buying and selling cumrocket coin a couple of times a day is liable for income tax, and it's clear his sole motivation for doing so is profit. According to this guidance from Jersey (IOM might rule differently) it looks like he probably won't be liable given the criteria laid out in that document. Of course, this would have to be confirmed, we can't be sure. But I'm more convinced of that than the simple 'intent to profit' being the determinant of whether something is liable for income tax across the board. Almost all investments in equities and cryptos are with the intent to profit. Are you really saying that they all should be liable for income tax?

[Phillip Dearden]

Determining what is taxable is not about John W's extrapolation but about the law. The law does trump guidance, where they conflict.

In Jersey and the IOM Income is taxable and case law has determined that the profits of a trade are taxable as income. Whether the purchase and sale of a virtual currency is a trade is a question of fact but, in practice, tricky to determine. In the IOM the sale of shares and houses can be either capital (not taxable) or trading transactions (not taxable) and it is rare for tax to apply as it is very hard to establish whether a trade has taken place. I suspect the same difficulty will arise with Bitcoin transactions. Nevertheless, whilst the facts of a particular case might be hard to determine, the tax position is clearer - income is taxable. Guidance can't change this but it might change which cases attract scrutiny.

 

[Aislinn]

I'm with you on that. (although I think you might have meant to write 'taxable' when referring to trading transactions).

I was mainly taking issue to John's claim that the criteria for income tax is 'intention to make profit' which doesn't seem right. (it's more to do with what qualifies as a trade.)

1 hour ago, Phillip Dearden said:

The law does trump guidance, where they conflict.

Of course. The question was not whether the guidance trumps law, but whether John W's extrapolation is more likely to be closer to the law than published guidance by government. While there definitely may be cases where government guidance conflicts with law, I assume they try very hard not to publish guidance that is misinformed. So unless it is clearly in breach of law wouldn't you agree that in the situation where we are unsure of the tax liabilities referring to published guidance is a reasonable thing to do? Certainly it is not foolproof and if large amounts of money are involved speaking to a tax lawyer would be preferable of course, but better than nothing?

[Andy Onchan]

Surely if you are spending/drawing funds for personal consumption (such as living expenses) from that gain then it should be taxable, as you would be "making a living" out of that investment activity??

[wrighty]

47 minutes ago, Andy Onchan said:

Surely if you are spending/drawing funds for personal consumption (such as living expenses) from that gain then it should be taxable, as you would be "making a living" out of that investment activity??

It's a grey area, as has been debated above, and the tax people should clarify/legislate.  

 

[John Wright]

56 minutes ago, wrighty said:

It's a grey area, as has been debated above, and the tax people should clarify/legislate.  

 

It’s not really grey. It’d be impossible to define precisely, case by case. The legal basis for tax, and what is taxed, hasn’t changed for a very, very, long time. There’s lots of case law, court decisions, tax commissioners decisions.

I suspect that we’d all recognise it when we saw it. It’s a matter of scope, degree, amount and frequency.

I grow cucumbers, i eat a few, give a few away, people give me cash for a few, or I sell all of them. Somewhere in the middle it stops being a hobby and becomes a taxable trade. It doesn’t matter what the commodity is that you produce or buy and sell. The principle is the same. That includes stocks, shares, bitcoins, houses, cars, stock in trade, etc.

Lots on here have suggested that profit from buying and selling bit coin is capital gain and not taxable. That’s just incorrect. It may not be, it may be. It depends on the facts and circumstances.

[Phillip Dearden]

59 minutes ago, wrighty said:

It's a grey area, as has been debated above, and the tax people should clarify/legislate.  

 

No, not grey.

The use to which you put your money does not determine its taxability.

You might inherit a family house and sell it and then live of the funds for many years, the fact that regular withdrawals are used to fund your living does not make the house-sale taxable.

Similarly, you might save your salary over many years and buy a factory/ship/castle - the fact you used your income to buy a capital asset does not prevent the income from being taxed.

I apologise a bit here, my examples do make the issue seem simpler than it is. Regular receipts are an indicator (no more) of trading which is usually taxable.

 

[Phillip Dearden]

13 hours ago, Aislinn said:

I was mainly taking issue to John's claim that the criteria for income tax is 'intention to make profit' which doesn't seem right. (it's more to do with what qualifies as a trade.)

 

I think John W was on the right path here. "Intention to make a profit" is how a trading transaction is determined and, on the Isle of Man, trading profits are taxed as income. 

[Aislinn]

55 minutes ago, Phillip Dearden said:

I think John W was on the right path here. "Intention to make a profit" is how a trading transaction is determined and, on the Isle of Man, trading profits are taxed as income. 

I believe investments are solely with the intention to make a profit and, on the isle of man, are not taxed as income.

https://www.accaglobal.com/uk/en/technical-activities/technical-resources-search/2011/august/badges-of-trade.html

https://www.gov.uk/hmrc-internal-manuals/business-income-manual/bim56840

http://www1.lexisnexis.co.uk/taxtutor/public/business/2a_business_tax/2a10-01(F).pdf

https://www.taxjournal.com/articles/taxation-profits-cryptocurrencies-18102017

 

So I think it seems unlikely that trmpton buying and selling cumrocket will be classified as a trade, given the case law Salt v Chamberlain and A Ali v HMRC. Ofc IANAL, speak to a tax solicitor if this actually concerns you.

Or just extrapolate from cucumbers it's pretty simple really, no ambiguity at all.

 

 

Edited May 7, 2021 by Aislinn

[Andy Onchan]

https://www.cnbc.com/2021/05/07/bank-of-englands-bailey-crypto-investors-risk-losing-all-their-money.html

[John Wright]

17 minutes ago, Aislinn said:

I believe investments are solely with the intention to make a profit and, on the isle of man, are not taxed as income.

https://www.accaglobal.com/uk/en/technical-activities/technical-resources-search/2011/august/badges-of-trade.html

https://www.gov.uk/hmrc-internal-manuals/business-income-manual/bim56840

http://www1.lexisnexis.co.uk/taxtutor/public/business/2a_business_tax/2a10-01(F).pdf

https://www.taxjournal.com/articles/taxation-profits-cryptocurrencies-18102017

 

So I think it seems unlikely that trmpton buying and selling cumrocket will be classified as a trade, given the case law Salt v Chamberlain and A Ali v HMRC. Ofc IANAL, speak to a tax solicitor if this actually concerns you.

Or just extrapolate from cucumbers it's pretty simple really, no ambiguity at all.

 

 

That ignores the fact that the law in UK is specifically different, because they have CGT. CGT catches profits from long term and short term trading in shares. So that’s not subject to UK income tax. So you can’t draw your conclusion.

A particular transaction in the UK may be exempt, subject to CGT or income tax, depending on the circumstances. 

So let’s go back to the house analogy:

1. Your principal residence - exempt

2. a second home, or occasional buying and selling on after renovation - CGT

3. several at once or repeatedly throughout a period - income and taxable as such.

[Aislinn]

In the UK profit from a trade is taxable as income not CGT. Are you saying that if something doesn't qualify as a trade in the UK (but qualifies for CGT) it might actually still qualify as a trade in the IOM because CGT doesn't exist on the IOM?

That doesn't seem right. Why should the existence of another tax change the determination on whether something qualifies as a trade or not?

[Roger Mexico]

51 minutes ago, Phillip Dearden said:

I think John W was on the right path here. "Intention to make a profit" is how a trading transaction is determined and, on the Isle of Man, trading profits are taxed as income. 

But that rather implies that 'hobby traders' such as @trmpton are operating as proper traders as they are certainly intending to make a profit.  And so they would have to be taxed as such.  Obviously the same would apply to stocks and shares and not just cryptocurrencies and possibly even to hardware hobbies - where the objects of trade are rare vinyl or cigarette cards or Old Master paintings.

To some extent this is another example of the law not really catching up with the internet which allows much greater ease of trading for all such things, so that amateurs can behave as professionals.  Owning shares is no longer about occasionally ringing up your broker after reading something in that morning's Times.

As with a lot of tax law (see our old friend avoidance v evasion) the current law on trading seems to be very much a 'smell test' there's no fixed rules where you can say that such or such a portfolio of activities is taxable trading or not.