Losses from share dealing

Ordinarily one would expect HMRC to not allow such losses as trading losses, only as capital losses. However a recent first tier tribunal has ruled that in the case of A Ali (TC4816) the classic hallmarks of trade were present viz:-

• Stock had been bought over an extended period with the intention of selling at a profit
• Length of period of ownership
• Frequency of similar transactions
• Circumstances responsible for the realisation
• Motive

Trading had to be distinguished from gambling and the tribunal were satisfied that this was not gambling. There was a business plan, albeit not written. He was a day trader having live access on-line to share prices and undertook these activities from the same building as his pharmacy business which was profitable. In the years under dispute he had about 1,000 transactions per annum. Therefore the losses could be sideways relieved against his general income.

Previously the activities had been considered as investment activities.

It remains to be seen if HMRC will appeal this decision.