Commentary

B5.628 Dealers in securities—special rules for determining profits

Business tax
Business tax | Commentary

B5.628 Dealers in securities—special rules for determining profits

Business tax | Commentary

Dealers in securities

B5.628 Dealers in securities—special rules for determining profits

Special rules apply to determine the amount that is taken into account in determining the profit from the trade as a dealer in securities. They do not apply where profits are calculated using the cash basis for small businesses from 2013/14 (see B2.112)1.

Taxation of amounts taken to reserves

In addition to introducing the requirement to prepare accounts using a generally accepted accounting practice, FA 2004 provided rules for calculating the profits of a trade in which a sale of securities would be brought into account as a trading transaction2. These rules are now consolidated in ITTOIA 2005, s 149 (income tax) and CTA 2009, s 128 (corporation tax). The corporation tax legislation specifies in addition that the rules apply to a company carrying on a banking business, an insurance business or a trade of dealing in securities3.

The rule is that profits and losses from the securities that in accordance with generally accepted accounting practice are calculated by reference to the fair value of the securities and recognised in the person's statement of recognised gains and losses (in accordance with UK GAAP4) or statement of changes in equity (in accordance with IAS) are brought into account in calculating the profits of the trade5. The term 'fair value' is an accounting term that is broadly equivalent to market value.

To prevent the same amount from being brought into account twice, this rule is disapplied to an amount so far as deriving

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