Trading

We have to try and understand if there has been a trade or a gain and in general transactions in financial futures and options will be treated as capital in nature unless they are regarded as profits or losses of a trade (s. 143 TCGA 1992). 

A financial futures transaction that is ancillary to a trade will be regarded as part of the main trade activities.  The transactions we are concerned with here are not conducted as part of another trade. The existence of a standalone trade in futures will be by reference to the so-called “badges of trade” case law, as there is no statutory definition of what constitutes a trade.

The existence of a trade in futures is likely to turn on the following points

• whether you were actively hedging risk with a view to making a profit from the spread the volume of trading
• Registration with the FSA (or any other regulatory authority)
• Whether you are effectively acting as undisclosed agent for another party or genuinely carrying out the transactions on your own behalf. (A closer review of the contractual arrangements with the “office” company is required);