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Commodity Transactions and the Private Investor

Article Abstract:

There are two commodity exchanges that are important in the United Kingdom: 1) the London Metal Exchange and 2) the London Commodity Exchange. There are five participants in the market including the producer, the consumer, the merchant, the dealer and the speculator. Trading in futures and options is described. There are four basic ways of investing in commodities: 1) discretionary accounts, 2) syndicates, 3) commodity unit trusts, and 4) the IG index. The dimension of time is the main difference in dealing in the commodities versus the securities market. Contangos and backwardations are described with examples. The tax considerations are far from simple. Generally, commodities investment gains are taxable as income rather than capital gains as they are generally short-term investments, and the nature of the asset is that it cannot be used and enjoyed. Motive for investment and the circumstances responsible for realizing the asset are also considered. In some cases, commodities trading has been considered gambling and taxed under Schedule D Case Six of the tax code, meaning there is an investment income surcharge. Anti-avoidance legislation is briefly discussed.

Tax policy, Commodities

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Investing in Industrial Building after the Budget

Article Abstract:

Initial and writing down allowances on industrial building (IBA) are taken into account for tax purposes in arriving at the trading profit or loss. No IBA is available on the land on which the industrial building is constructed. No initial allowance is available to a subsequent purchaser of an industrial building. A balancing charge may arise if the net sale proceeds on disposal exceed the residues of expenditure, but in any event, will not exceed allowances previously given. Where grants or subsidies are made available, they will have to be deducted in arriving at total expenditure eligible for IBA.

Taxation

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Maximising CGT Retirement Relief

Article Abstract:

The Capital Gains Tax Act 1979 of the United Kingdom is examined. Section 124 provides for exemption for proprietors of businesses and family trading companies. There are requirements including age (sixty-five for full relief) and ten years of ownership and directorship. Some common pitfalls are outlined, most specifically ceasing action as a full time director before disposal of the business. Examples are outlined to explain key points.

Interpretation and construction, Tax law, Capital gains tax

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