Calculating your Taxable Profits
Whilst we would always recommend that you should obtain professional advice in preparing your accounts and calculating your taxes, we are aware of several occasions where the taxable profits have been misstated.
Each of these situations have arisen due to an enquiry by the specialist trader unit of HM Revenue & Customs being raised into a tax return submitted by either the trader themselves or their advisers.
In each case, the income declared has been understated due to a variety of circumstances such as:
- Only income that has been drawn down from the trading account by the individual in question in that period has been declared
- Income that is held back by the trading arcade and held in a reserve account have not been declared
- Profits on trades that have been completed by the end of the trading period but not received from trading arcades/accounts before the end of the period are omitted
- Commissions paid have been offset against net trading gains, thus meaning that commission charges have been double-counted resulting in taxable profits being understated
- Omitting one or more sources of income such as different trading accounts
Should such an enquiry be made into your affairs, HM Revenue & Customs will charge interest on any late-paid tax. In addition, penalties on any understatement of the tax liability may be imposed of up to 100% of the misstatement (although higher penalty levels are unlikely in all but the most severe cases).
It is therefore necessary to declare all trading profits made but not necessarily received in the period and this can usually be obtained by a relatively simple review of your trading statements.
Dependent upon your trading account provider/arcade, your trading statements may or may not provide monthly, quarterly or annual summaries of your trading results and any figures shown in any other currency other than sterling would need to be converted to sterling using appropriate spot rates during the year.
Of course, should you have any difficulty in preparing your accounts or tax return, our specialists will be happy to prepare the relevant documents. Please contact us for further advice or to arrange a suitable time to discuss your requirements in more detail.