Starting a small trading business

runswithascript · 02-07-2023 1:26pm #1

I would prefer to not pay 33% CGT going forward and it seems some kind of private limited company is the most tax efficient option.

The company is for personal use only, and some kind of privacy through a nominee service is required.

I would like to learn to do as much as reasonably possible myself or with software, even if not from the beginning.

If you have done this, or can recommend some resources, or tell me what to look for when choosing a financial advisor/company setup service please reach out.

SureYWouldntYa · 03-07-2023 7:40pm

What will you be doing that attracts CGT in a personal capacity that does not attract CGT as a company?

runswithascript · 06-07-2023 4:54pm

https://www.boards.ie/discussion/comment/120800937#Comment_120800937

Trading.

SureYWouldntYa · 07-07-2023 10:59am

https://www.boards.ie/discussion/comment/120814195#Comment_120814195

If trading at a high enough capacity to call it trading and subject to CT at 12.5%, it would have been subject to Income Tax rather than CGT at a personal level in any event

Is it going to be your full time job? If you're also in PAYE employment, Revenue could rule it not trading and subject to CGT in the company in any event, then bringing about the problem of extracting the funds from the company

runswithascript · 07-07-2023 3:35pm

https://www.boards.ie/discussion/comment/120817235#Comment_120817235

When I last paid taxes related to market income I spoke with revenue and explained my situation and they told me they were happy for me to pay CGT, though as you have said and as I have been learning in recent days, CGT is for investing, PAYE is for trading.

Someone else told me that a company can be set up to minimise taxes from trading but that it is very complex and costly, really only worth it if you have a portfolio of millions, and apparently if the whole purpose of the company is to minimise taxes that would be an issue with Revenue?

I would like the option for it to be my full time job but I want to start slow and small and see how things go. Are you talking about a scenario where I would be an employee of a business I start for this purpose or working for any company? Please tell me more about how Revenue could rule it not trading if I am in PAYE employment.

If it is practical and completely within the bounds of the law for a small time trader to setup a company for their own personal use, and for the purpose of tax efficiency, I would like to. If instead it is the case that traders in Ireland just use PAYE then that is just the way it will have to be. Searching online for 'trading business Ireland' etc brings up a lot of irrelevant results not related to financial market trading, and including those terms did not help much.

DFB-D · 21-07-2023 12:54am

https://www.boards.ie/discussion/comment/120818859#Comment_120818859

The rate of CT is 33% on capital gains for companies too.

But there are other capital gains exemptions you can look at but you need a tax advisor.

Investment companies may be able to pay 25% on dividend income, but to achieve the 12.5% for trading shares is a incredibly high bar, you need to consider the badges of trade and caselaw to see if it can be achieved.

You will also pay income tax on distributions from the company to you, maybe you can pay yourself a salary of approx 10% income of company would be the max accepted by Revenue, salary is deductible in calculating tax, distributions are not. And finally pay CGT of 33% when you liquidate the company.

runswithascript · 23-07-2023 10:13am

https://www.boards.ie/discussion/comment/120878055#Comment_120878055

Thanks for the input.

Is there anything in particular I can use to filter tax advisors when searching, in terms of finding quality but also not being ripped off? I spoke with the office of one financial advisor and they quoted me €400 for a meeting. I have also spoke with Enterprise Ireland and they have a mentorship programme and and some courses on tax and setting up a company.

I like to learn to do things myself, or with software, as much as possible but I appreciate this is complex and it is worth considering the consequences of making a mistake if I were to try save money on advice. I am happy to pay for advice though I should keep in mind my initial capital is approximately €10K, which once in place will generate more profits than losses most days.

Since I read on boards that Revenue would have an issue with any company that was setup to minimise taxes I have been getting used to the idea of just going the PAYE route for frequent trades, CGT for any investments. If I can minimise taxes through a company without breaching anything great, and if the advice and administration is not prohibitively expensive (considering the initial capital) I will do this from the start, otherwise I could build the account first over time and then go that route.

I am unsure how familiar you are with paying for the kind of advice I require, but if you are would you have a rough idea of how much I might expect to pay? I have read it could be very expensive to setup and only worth doing so for a portfolio of millions.

DFB-D · 23-07-2023 11:02am

https://www.boards.ie/discussion/comment/120885561#Comment_120885561

The consulatation fee seems reasonable.

I wouldn't say you need millions to make it worthwhile to set up a company, but you do need gains/profits which can cover 6 to 7k of accounting fees per annum (Full FRS102 accounts and audit every year). The small company exemption excludes investment companies.

If I were you, I would look for an advisor which also has pension experience, the latter being the most effective to defer tax.

But 10k is such a small amount, a 10% increase would be be taxed as 1000 * 33% = 330 less annual cgt exemption 1270 = 0 cgt.

The cgt exemption is not available to companies so that also is something to consider.

runswithascript · 23-07-2023 12:54pm

https://www.boards.ie/discussion/comment/120885675#Comment_120885675

Perhaps proving I can generate enough in one year with PAYE and CGT, outside of a cyclical and possibly secular bull market, so that those accounting costs equate to 5%-10% of annual revenue profits before tax is the best option.

I expect to use the capital much more for PAYE trades over periods of minutes, hours, and days, rather than CGT investing for longer periods, though I have not been able to determine the exact definition Revenue use to differentiate say a swing trade from a short term investment.

Noted about pension experience, that is very interesting.

Furze99 · 23-07-2023 1:23pm

As stated above "I wouldn't say you need millions to make it worthwhile to set up a company, but you do need gains/profits which can cover 6 to 7k of accounting fees per annum (Full FRS102 accounts and audit every year)."

This is likely why many essentially self employed people/ small businesses choose to trade as sole traders or partnership etc. Once you keep on top of your accounts, it's quite feasible to manage your own tax affairs. Putting excess earnings into a private pension is still a tax efficient offering, even if currently private pension values are oscillating with the ongoing war & instability in Europe.

There are individuals who have limited companies set up to manage their affairs. Two well known figures in the current public news would be Ryan Tubridy and Joe Duffy, contractors of services to RTE. Tuttle Productions Ltd would be Tubridy's company and I think Claddaghgreen is Joe Duffys?

Mick Tator · 24-07-2023 6:31pm

What no longer surprises me about threads like this is the amount of time some people spend on non-critical issues in a micro start-up. ‘How to avoid paying tax’ usually is accompanied by an equal reluctance to pay a professional advisor. Invariably we discover that the investment involved is insignificant and a professional fee of a few hundred quid is regarded as meriting diccussion.

In this case the OP has €10k to play with. I suggest OP that you spend your time researching / analyzing a small number of market sectors and actually trading in them for a while, hopefully making money first before worrying about paying a few hundred quid in tax. By year-end you will either have lost some capital or made a profit . Very few today will make more than €1250 net of expenses on 10k.

@Furze – I agree with some of what you write. Pension contribution is efficient, OP could eventually set up and manage his own pension fund and us it for trading but not with a paltry 10k. A Ltd co. has many other merits and reasons you do not mention. Neither Tubridy nor Duffy need worry about FRS102, it does not apply to their companies.

runswithascript · 26-07-2023 8:44pm

https://www.boards.ie/discussion/comment/120891159#Comment_120891159

There is nothing wrong with querying whether it is possible to be more tax efficient, whether the capital is 10K or 10M, and whether you describe it as tax avoidance with the negative connotations of that or not, and which it should be noted is not the same as tax evasion. Even with my limited experience running a company, I am certain that if you are running one and have not explored tax planning you should be seeking financial advice.

Nowhere in the thread did I express a reluctance to pay a professional advisor, instead I asked if there was a way to filter the myriad of advisors available, if the rate I was quoted was fair, and how much I should expect to pay for all advice and administration annually. Again, all fair questions for an Entrepreneurial & Business Management forum.

I have invested using macro and econometrics and traded price action systematically with python, and €1270 has been a bitter pill to swallow. I am aware that strictly one should use PAYE for trading and CGT investing. You would be mistaken to assume my experience trading under a business and with financial advisors, and the paltry 10K I want to explore this with, reflects my previous market experience or success. There is a vast spectrum of experience in trading between the novice and someone with a multi-million dollar portfolio.

https://www.boards.ie/discussion/comment/120886141#Comment_120886141

It would be great if there were options other options than pension contributions but I guess time will tell.

Mick Tator · 28-07-2023 12:12am

https://www.boards.ie/discussion/comment/120900909#Comment_120900909

This response reads like something composed by chatgtp!

sumitmak7296 · 02-08-2023 12:23pm

Starting a small trading business requires careful planning, dedication, and continuous effort. With the right strategy and a customer-focused approach, you can build a successful and profitable trading business.

sugarman20 · 02-08-2023 12:37pm

Worrying about tax and your trading capital is 10k? Best of luck because you will need it.

Mick Tator · 04-09-2023 6:30pm

@Bunkerintegrated Feed 'Start with a large business and wait' into your input and see what other off-topic nonsense is churned out.

alexago · 28-09-2023 2:18am

Everyone knows that it is important to have a good business plan. It will help to understnand what steps to take and how much money you will need for your startup.

Then comes a registration. Here you can find a good registered office address provider (here is a good list) and use a virtual office address to fasten the process.

After the creation of the business, you'll need to promote it. This is a high time to work on marketing and SEO.

Susan_Batten · 03-10-2023 4:18pm

Thanks a lot!

Susan_Batten · 06-10-2023 4:57pm

I think it is very important to work with different specialists to learn how to promote and develop your business. Luckily I had a business plan. But I had no practice and I had never opened a company in another region. That's why I visited the site and used the services. Assistants helped us with the registration process and setting up accounting. I’m glad that my company has begun to develop and is operating successfully.

Starting a small trading business

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