Day Trading & CGT

boardzz · 05-02-2021 1:03am #1

Hi I’m wondering about scenarios where you trade stocks within hours or even minutes.

Are you able to offset losses against gains in this scenario. I heard something about four week rule. Not sure what that means.

LawBoy2018 · 05-02-2021 1:09am

boardzz wrote: »

Hi I’m wondering about scenarios where you trade stocks within hours or even minutes.

Are you able to offset losses against gains in this scenario. I heard something about four week rule. Not sure what that means.

How often do you trade generally?

boardzz · 05-02-2021 1:16am

I started off buying and selling daily. Then changed to long term holds.
All within the past ten months.

LawBoy2018 · 05-02-2021 1:20am

You should reach out to an accountant imo. If you were deemed to be a trader, you'd be paying 52% income tax + you wouldn't be able to carry the losses afaik. Happy to be corrected on this if I'm wrong.

boardzz · 05-02-2021 2:20am

I’ll try and use the following as an example.

Buy share A and sell 2 hours later - €5000 loss
Buy share B and sell 2 days later - €5000 loss
Buy share C and sell 5 months later - €10000 profit

Is it:
A. Zero profit or loss. Declare it and pay nothing.
B. €10,000 loss is not deductible because owned for less than 28 days, pay CGT on €10000 profit.

inisfree0504 · 05-02-2021 2:34am

This is exactly what was mentioned in the other thread.

Revenue's website seems to say in black-and-white that those losses cannot be used.

"Shares sold within four weeks of acquisition
Shares bought and sold within a four-week period cannot be offset against other gains.
You can only deduct the loss from a gain made on a subsequent disposal of same-class shares acquired within the four weeks."

https://www.revenue.ie/en/gains-gifts-and-inheritance/transfering-an-asset/selling-or-disposing-of-shares.aspx

That said, I'm wary of taking this at face value for a number of reasons, not least of which is that I cannot find where exactly this is set out in the legislation nor is this particular rule mentioned in any of Revenue's other guidance documents. The only reference to 'Disposals of shares or securities within 4 weeks of acquisition' I can find in the legislation deals with the bed-and-breakfast rule and the nuances of FIFO. Similarly, the section on allowable losses, as amended, does not specify such a prohibition on disposals not reacquired. I'm not an expert on reading legislation, and have extremely limited knowledge of tax rules in general, so this could be absolutely off the mark or I may be missing something big.

What I will say is that it seems unsubstantiated enough to warrant running it by an accountant rather than taking as gospel as it could have very significant bearing on your overall liability. If anyone who does have knowledge/confirmation on this would like to weigh in, that would be much appreciated.

For anyone curious the relevant section is here
http://www.irishstatutebook.ie/eli/1997/act/39/enacted/en/print#sec581

LawBoy2018 · 05-02-2021 1:54pm

inisfree0504 wrote: »

This is exactly what was mentioned in the other thread.

Revenue's website seems to say in black-and-white that those losses cannot be used.

"Shares sold within four weeks of acquisition
Shares bought and sold within a four-week period cannot be offset against other gains.
You can only deduct the loss from a gain made on a subsequent disposal of same-class shares acquired within the four weeks."

https://www.revenue.ie/en/gains-gifts-and-inheritance/transfering-an-asset/selling-or-disposing-of-shares.aspx

That said, I'm wary of taking this at face value for a number of reasons, not least of which is that I cannot find where exactly this is set out in the legislation nor is this particular rule mentioned in any of Revenue's other guidance documents. The only reference to 'Disposals of shares or securities within 4 weeks of acquisition' I can find in the legislation deals with the bed-and-breakfast rule and the nuances of FIFO. Similarly, the section on allowable losses, as amended, does not specify such a prohibition on disposals not reacquired. I'm not an expert on reading legislation, and have extremely limited knowledge of tax rules in general, so this could be absolutely off the mark or I may be missing something big.

What I will say is that it seems unsubstantiated enough to warrant running it by an accountant rather than taking as gospel as it could have very significant bearing on your overall liability. If anyone who does have knowledge/confirmation on this would like to weigh in, that would be much appreciated.

For anyone curious the relevant section is here
http://www.irishstatutebook.ie/eli/1997/act/39/enacted/en/print#sec581

I love these tax threads! I learn so much.

Jimbobjoeyman · 05-02-2021 1:56pm

If your holding period is pretty short maybe look into spread betting.
Pretty much the exact same as using CFD's but since its legally considered gambling there is no tax to be paid on profits.

hottipper · 05-02-2021 10:34pm

Bit risky also unless your a pretty good trader :pac:

Latro · 07-02-2021 1:49pm

So if you are day trader, does it mean that any gains are taxable and losses are not losses for taxes purposes?

Jimbobjoeyman · 07-02-2021 1:52pm

Latro wrote: »

So if you are day trader, does it mean that any gains are taxable and losses are not losses for taxes purposes?

Yes.

It's essentially a deterrent to save people from themselves.
If you happen to have a strategy that makes money the only real tax efficient way to do it is with spread betting.

Latro · 07-02-2021 2:11pm

Jimbobjoeyman wrote: »

Yes.

It's essentially a deterrent to save people from themselves.
If you happen to have a strategy that makes money the only real tax efficient way to do it is with spread betting.

So let's assume someone has 100k euro broker account and day trades a lot.
Every time different shares.

During the year that person accumulated 300k profit and 270k loss and 30k broker fees, resulting in 0 net gains.

Does that person have to pay 33%(or 51%?) on 300k gains resulting the account to be wiped out to 0 after taxes?

Jimbobjoeyman · 07-02-2021 2:14pm

Latro wrote: »

So let's assume someone has 100k euro broker account and day trades a lot.
Every time different shares.

During the year that person accumulated 300k profit and 270k loss and 30k broker fees, resulting in 0 net gains.

Does that person have to pay 33%(or 51%?) on 300k gains resulting the account to be wiped out to 0 after taxes?

no idea what the rate is as I'm not an accountant.
But you are taxed on the 300k profit.

As said above you need to hold a security for a reasonable period of time for it to be classified as a capital gain and thus usable to offset against your tax liability.
The exception from what I've read above is trading the same share class within a window (open to correction).

So at the end of the year you're not at zero but at a significant loss after tax is paid.

broccoli123 · 07-02-2021 8:31pm

boardzz wrote: »

I’ll try and use the following as an example.

Buy share A and sell 2 hours later - €5000 loss
Buy share B and sell 2 days later - €5000 loss
Buy share C and sell 5 months later - €10000 profit

Is it:
A. Zero profit or loss. Declare it and pay nothing.
B. €10,000 loss is not deductible because owned for less than 28 days, pay CGT on €10000 profit.

If you bought share "C" within 4 weeks time of purchasing both shares - "A" and "B", then you can use the loss of 10,000 to offset the gain resulting in no tax liability.

LawBoy2018 · 07-02-2021 8:38pm

broccoli123 wrote: »

If you bought share "C" within 4 weeks time of purchasing both shares - "A" and "B", then you can use the loss of 10,000 to offset the gain resulting in no tax liability.

No, it would be 10,000 x 33% CGT = €3,300 tax liability (assuming that the annual exemption has already been used)

According to the Revenue Guidance mentioned above, the losses associated with the disposals made within the 4-week rule may not be carried forward.

inisfree0504 · 08-02-2021 12:45am

broccoli123 wrote: »

If you bought share "C" within 4 weeks time of purchasing both shares - "A" and "B", then you can use the loss of 10,000 to offset the gain resulting in no tax liability.

With all due respect I think we're just making things up at this point. I'm not sure where you could possibly have found a basis for this interpretation of things.

I've sent a letter on the matter to the personal finance columnist who does Q&As in the IT. Hopefully we'll get a reply/definitive answer in the coming weeks.

Crimson_Ghost · 10-02-2021 4:08pm

Hi All,

Thanks for contributing to this thread. I am currently querying this four week rule with Revenue. I have reviewed all documentation that I could find and I can’t see anywhere in the Tax Acts which limits offsetting losses against gains for short term share dealing (where shares are bought and sold within a short time frame – i.e. less than four weeks) other than the limitation under S 581 (i.e. repurchase of same shares after incurring a loss). However this limitation only seems to relate to where same shares are repurchased within four weeks and I can’t see how it limits offsetting losses where shares are not repurchased.

If CGT is payable on short term dealing when a gain is made then in the spirit of Tax Law an equivalent loss should be allowed for offset (setting the four week repurchase rules aside per S 581 on the Tax Act).

It seems in the US and UK there is a more structured tax system for Short Term Share trading. Also I’d be interested to know whether the Revenue are applying the same limitation in terms of offsetting losses to High Frequency Trading companies resident in Ireland where they make losses.

It may be useful if the IT received a couple of letters on this topic. Look forward to hearing more on this and will keep the thread updated with my experience.

Also I wanted to add - In the US, Canada, UK etc. there is no rule limiting offsetting short term losses (other than something similar to the loss and repurchase rules we have in Section 581 of the tax act). Those countries recognize the fact that a lot of people day trade for a living.

inisfree0504 · 11-02-2021 5:45pm

Very interesting you haven't found anything in the tax acts either and it's great you've queried this directly with Revenue.

I know it's clearly stated on Revenue's website and it would be quite extraordinary if it were wrong - but I do have a legal background (again - not an expert/practitioner) and we were always taught never to rely on the info given by the bodies applying legislation as it is only their interpretation of things (albeit an authoritative one) but to always check the statute book itself.

Another poster mentioned it was brought in at some stage 'a while back' but I have looked at amendments to the 1997 Act etc and can't see it there either.

Crimson_Ghost · 12-02-2021 11:35am

Yes you are dead right - it is always good to question the interpretation of the law because it can sometimes be incorrect or for the court to help resolve. The simple example given on the website is not in line with the law or the more detailed examples they give in the associated documents.

In terms of them bringing it in a while back - yes you are correct there have been no amendments. If the other poster was talking to one of the same people as me (who also said this was "brought in a while back") then this person also told me not to worry about it as CGT would be deducted at source by the broker! He was getting mixed up between Dividend Withholding Tax and CGT and also mixing up Irish Share Dealing vs. US Share Dealing so I disregarded all of what was said and continued my line of enquiry by writing.

For people doing Day Trading as a living in other countries, it would be nearly impossible most of the time to make a living out of it if they couldn't offset short term losses against gains. They are not prohibited in this regard and so I don't see why people should be restricted in Ireland if it is something they are good at and want to make a living out of.

Crimson_Ghost · 24-02-2021 7:05pm

Still waiting on a response from Revenue.
They did initially respond to quote their website at me even though my query was in relation to the specific section of the Act which prohibited netting short term losses against gains (excl. bed and breakfast, rebuy scenario).

I went back on the response and again requested they direct me to the specific section of the law on this. This was some weeks ago and haven't heard back since.

I'll be ringing to chase up next week.

pioneerpro · 24-02-2021 7:20pm

Crimson_Ghost wrote: »

Still waiting on a response from Revenue.
They did initially respond to quote their website at me even though my query was in relation to the specific section of the Act which prohibited netting short term losses against gains (excl. bed and breakfast, rebuy scenario).

I went back on the response and again requested they direct me to the specific section of the law on this. This was some weeks ago and haven't heard back since.

I'll be ringing to chase up next week.

A civil servant won't give you tax advice in this context and possibly open themselves up to liability. I'd say registered financial advisor or you're pissing in the wind. I've taken the 4 week rule to heart, for better or worse, and just acknowledged Ireland doesn't want you to build wealth like other countries (€1,270 CGT threshold? Jokable). You've presumably seen this bloody article recently calling for a speculation tax. Sickening.

https://www.thejournal.ie/readme/column-gamestop-financial-transactions-tax-victor-duggan-5346346-Feb2021/

Rothmans · 24-02-2021 7:35pm

I could be misinterpreting the above link to the revenue site, but, from my reading if it, it only addresses the 4 week rule with respect to it's application to the CGT regime, not Income Tax.

As in, you are disallowed from writing off a loss for a share held for less than 4 weeks against a different class of share, in order to reduce your CGT liability. I.e. you must pay income tax on any gains on shares against which you wish to apply this loss I.e. you must pay the marginal IT rate on such gains rather than trying to get away with paying the more favourable CGT rate.

In other words, I see it as a method of discouraging traders from trying to make their profits come within the scope of the CGT regime.

The above link just appears to prohibit using short term losses against gains (for shares from other companies) for the purpose of capital gains tax. It doesn't prohibit the use of short term losses against gains for the purposes of Income Tax (which is what what you should be paying anyway if you are a trader). It would be analogous to saying a sole trader should be basing his income taxes on all of his revenue, as opposed to his profit, which would make no sense.

pioneerpro · 24-02-2021 7:43pm

IANAL or ACA or whatever, but I'm pretty sure you're wrong. They'd spell it out.

You dispose of an asset, you pay capital gains. Simple as. They spell out the 4 week rule for stock explicitly. The only thing that counts as 'income' would be dividends (52% at that... christ)

If you're PAYE and trading on the side you can hold for a month or go jump is my understanding.

Have a good perusal here:

https://www.askaboutmoney.com/forums/tax.6/

Rothmans · 24-02-2021 9:10pm

pioneerpro wrote: »

IANAL or ACA or whatever, but I'm pretty sure you're wrong. They'd spell it out.

You dispose of an asset, you pay capital gains. Simple as. They spell out the 4 week rule for stock explicitly. The only thing that counts as 'income' would be dividends (52% at that... christ)

Unless it is trading income, which is exactly the point I'm making. I'm suggesting that, in making this rule, the Revenue reasoning is 'why would a person be buying or selling shares within such a short time-frame, unless they were actively engaged in trading them?' - It's likely a measure to limit the CGT rate to genuine investors as much as possible IMO, not just some arbitrary rule.
Remember - length of period of ownership and frequency of similar transactions are two factors which the Revenue consider in determining whether income is in the nature of a trade or not.

If you're PAYE and trading on the side you can hold for a month or go jump is my understanding.

That's just a rewording of what I said really. .i.e. it's just not allowed for CGT purposes (which doesn't mean that it wouldn't be allowable for IT purposes).

devils_avocado · 24-02-2021 11:12pm

Rothmans wrote: »

I could be misinterpreting the above link to the revenue site, but, from my reading if it, it only addresses the 4 week rule with respect to it's application to the CGT regime, not Income Tax.

As in, you are disallowed from writing off a loss for a share held for less than 4 weeks against a different class of share, in order to reduce your CGT liability. I.e. you must pay income tax on any gains on shares against which you wish to apply this loss I.e. you must pay the marginal IT rate on such gains rather than trying to get away with paying the more favourable CGT rate.

In other words, I see it as a method of discouraging traders from trying to make their profits come within the scope of the CGT regime.

The above link just appears to prohibit using short term losses against gains (for shares from other companies) for the purpose of capital gains tax. It doesn't prohibit the use of short term losses against gains for the purposes of Income Tax (which is what what you should be paying anyway if you are a trader). It would be analogous to saying a sole trader should be basing his income taxes on all of his revenue, as opposed to his profit, which would make no sense.

This is an interesting perspective. Legally though I don't see on what basis Revenue could seek to enforce this unless (as others have commented) there is some provision (other than s581) which sets out the rule they base the stated position on.

To put it another way, Revenue can't arbitrarily decide that someone who sells for a loss within 4 weeks is a trader who's loss is subject to income tax, while also not making gains made from sales within 4 weeks similarly charged. (More generally I don't see how they could determine someone is a trader based solely on something as arbitrary as this). Also if the less than 4 week losses are to be set off against other gains for income tax purposes, how to you determine what those other gains are that are subject to income tax? Surely either someone is a trader or they are not (unless you're saying all gains from shares then become subject to IT rather than CGT)

pioneerpro · 24-02-2021 11:32pm

devils_avocado wrote: »

(unless you're saying all gains from shares then become subject to IT rather than CGT)

Disposal of an asset class counts for CGT, CFDs count as gambling, and Dividends count as Income Tax. But there's a tonne of stuff that falls in between.

If you sell naked puts or covered calls, what does that fall under?
If you split a unit of a SPAC and end up with a common and a warrant with a composite value more than the unit, where does that fall?
And can you offset the brokerage fee for splitting it (other than as a business expense like your commissions) if you're a PAYE and also trading?

Like they will happily interpret it anyway they want is my understanding, and charge you interest and penalties whilst you try and sort it out through the scant legal avenues available to you.

Rothmans · 24-02-2021 11:35pm

devils_avocado wrote: »

This is an interesting perspective. Legally though I don't see on what basis Revenue could seek to enforce this unless (as others have commented) there is some provision (other than s581) which sets out the rule they base the stated position on.

To put it another way, Revenue can't arbitrarily decide that someone who sells for a loss within 4 weeks is a trader who's loss is subject to income tax, while also not making gains made from sales within 4 weeks similarly charged. (More generally I don't see how they could determine someone is a trader based solely on something as arbitrary as this). Also if the less than 4 week losses are to be set off against other gains for income tax purposes, how to you determine what those other gains are that are subject to income tax? Surely either someone is a trader or they are not (unless you're saying all gains from shares then become subject to IT rather than CGT)

Absolutely agree. Without specific statutory authority/authority from csae law, Revenue can merely offer their guidance and interpretation (so called 'Badges of a Trade', I would imagine, would be high among their considerations)

Particularly with regard to your second paragraph, other jurisdictions are keen to argue that there is a high threshold to pass to be regarded as a trader. In the case mentioned below, the guy conducted 300 transactions per year, and was still not regarded as a trader. From a government's point of view, they don't want a massive number of hobbyists being able to write their losses off against their ordinary income. As the interesting linked article argues, this could be 'catastrophic' for the exchequer.

However, the below article relates to the UK. While you would think the Revenue might have a similar attitude, it is important to bear in mind that, not only is the rate of CGT higher in Ireland, the CGT exemption limit in the UK is over 11 times greater than the paltry €1270 limit allowed here. Therefore, the proportion of tax the UK authorities would actually take from hobbyists under the CGT regime would obviously be significantly less than the Revenue take here. This, to my mind, may result in the Irish Revenue having a slightly different take on it here.

https://tax.bloomsburyprofessional.com/blog/income-vs-capital

devils_avocado · 24-02-2021 11:44pm

Rothmans wrote: »

Absolutely agree. Without specific statutory authority/authority from csae law, Revenue can merely offer their guidance and interpretation (so called 'Badges of a Trade', I would imagine, would be high among their considerations)

Particularly with regard to your second paragraph, other jurisdictions are keen to argue that there is a high threshold to pass to be regarded as a trader. In the case mentioned below, the guy conducted 300 transactions per year, and was still not regarded as a trader. From a government's point of view, they don't want a massive number of hobbyists being able to write their losses off against their ordinary income. As the interesting linked article argues, this could be 'catastrophic' for the exchequer.

However, the below article relates to the UK. While you would think the Revenue might have a similar attitude, it is important to bear in mind that, not only is the rate of CGT higher in Ireland, the CGT exemption limit in the UK is over 11 times greater than the paltry €1270 limit allowed here. Therefore, the proportion of tax the UK authorities would actually take from hobbyists under the CGT regime would obviously be significantly less than the Revenue take here. This, to my mind, may result in the Irish Revenue having a slightly different take on

That case is very interesting thanks. Agree about the two different approaches here and in the UK

pioneerpro · 24-02-2021 11:48pm

Rothmans wrote: »

From a government's point of view, they don't want a massive number of hobbyists being able to write their losses off against their ordinary income. As the interesting linked article argues, this could be 'catastrophic' for the exchequer.

Which is all when and good, but you're leaving out a key point - casual traders, in fact everyone in the UK over 18 has an annual £20,000 ISA allowance (april 5th - april 5th IIRC).

You can use all of this for a stocks & shares ISA if you want, or you can split it between stocks & shares and any of the other types of ISA inclusive of cash ISAs or other asset classes.

So a dialogue in relation to capital gains tax allowance differences between the two jurisdictions really needs to take this into account when you're inferring points about 'hobbyists' (i.e. what the rest of the world calls retail traders). Intraday rules accounting for # of trades in a given period, and how it also affects margin, come into play for the UK as well when you cross that threshold. Ireland basically tells you to go jump.

Rothmans · 25-02-2021 12:12am

pioneerpro wrote: »

Which is all when and good, but you're leaving out a key point - casual traders, in fact everyone in the UK over 18 has an annual £20,000 ISA allowance (april 5th - april 5th IIRC).

You can use all of this for a stocks & shares ISA if you want, or you can split it between stocks & shares and any of the other types of ISA inclusive of cash ISAs or other asset classes.

So a dialogue in relation to capital gains tax allowance differences between the two jurisdictions really needs to take this into account when you're inferring points about 'hobbyists' (i.e. what the rest of the world calls retail traders). Intraday rules accounting for # of trades in a given period, and how it also affects margin, come into play for the UK as well when you cross that threshold. Ireland basically tells you to go jump.

I don't mind calling people hobbyists, retail traders or casual traders. I'm one myself. That's just semantics.

ISAs are a fantastic idea. However, I don't see your point. Any growth in ISAs are free of tax, whether it is in the form of capital gains or deposit interest (lol) much like a pension fund. The fact that ISAs are an option in the UK bolsters the point I've made in my previous post, rather than detracts from it, as you appear to be suggesting. It provides the taxpayer greater scope to reduce their tax liability on capital gains in respect of shares.

You might find the tax regime in Ireland to be burdensome. I do too, especially when it comes to Capital Gains. But we have to arrange our affairs in accordance with the taxation landscape within which we find ourselves, and that's how best to frame responses on this thread i.e. based on the way things are, rather than how we'd like them to be.

pioneerpro · 25-02-2021 12:48am

Rothmans wrote: »

I don't mind calling people hobbyists, retail traders or casual traders. I'm one myself. That's just semantics.

Ah i'm not picking, and I stress this, you're definitely in the top 1% here in terms of balanced and neutral assessments and tone. Just that framing it as a 'hobby' or a 'casual' only helps normalise the sad reality of Ireland vs most of the developed world who can manage their pension funds and engage in things like FIRE by building wealth through investment.

Here we can't even depend on compounding interest from basic financial instruments like ETFs due to deemed disposal rules. Managing wealth and hedging against the future should be a basic part of financial literacy. Here it's subject to utterly draconian barriers to entry that have denoted property as the only acceptable investment and have ended up, in part, contributing to a major housing crisis.

ISAs are a fantastic idea. However, I don't see your point. Any growth in ISAs are free of tax, whether it is in the form of capital gains or deposit interest (lol) much like a pension fund.

It's to do with this statement:

it is important to bear in mind that, not only is the rate of CGT higher in Ireland, the CGT exemption limit in the UK is over 11 times greater than the paltry €1270 limit allowed here

Which goes a long way to highlighting the inequality, but misses the salient point imo, which is touched on here[

devils_avocado wrote: »

From a government's point of view, they don't want a massive number of hobbyists being able to write their losses off against their ordinary income.

If you combine the CGT and the ISA, you realise that the composite tax free stock speculative gain allowance in the UK is actually higher than the Irish median net income. From that point onwards, any comparison between the two jurisdictions is null and void and serves no purpose, as that single fact nullifies the 'ordinary income' writeoff argument completely imo.

But we have to arrange our affairs in accordance with the taxation landscape within which we find ourselves

And sad as it is to say, highlighting the inequality and proposing domiciling in a different jurisdiction for people who wouldn't even be considered 'high earners' has to be part of that conversation in 2021. There's a reason why the startup culture is so poor here, why basic perks are subject to BIK, and why the housing market is overheated - and its part of the social acceptance of this state of affairs, even by the relatively financially literate.

Rothmans · 25-02-2021 1:19am

pioneerpro wrote: »

Ah i'm not picking, and I stress this, you're definitely in the top 1% here in terms of balanced and neutral assessments and tone. Just that framing it as a 'hobby' or a 'casual' only helps normalise the sad reality of Ireland vs most of the developed world who can manage their pension funds and engage in things like FIRE by building wealth through investment.

Here we can't even depend on compounding interest from basic financial instruments like ETFs due to deemed disposal rules. Managing wealth and hedging against the future should be a basic part of financial literacy. Here it's subject to utterly draconian barriers to entry that have denoted property as the only acceptable investment and have ended up, in part, contributing to a major housing crisis.

It's to do with this statement:

Which goes a long way to highlighting the inequality, but misses the salient point imo, which is touched on here[

If you combine the CGT and the ISA, you realise that the composite tax free stock speculative gain allowance in the UK is actually higher than the Irish median net income. From that point onwards, any comparison between the two jurisdictions is null and void and serves no purpose, as that single fact nullifies the 'ordinary income' writeoff argument completely imo.

And sad as it is to say, highlighting the inequality and proposing domiciling in a different jurisdiction for people who wouldn't even be considered 'high earners' has to be part of that conversation in 2021. There's a reason why the startup culture is so poor here, why basic perks are subject to BIK, and why the housing market is overheated - and its part of the social acceptance of this state of affairs, even by the relatively financially literate.

And I absolutely with all of your points. Especially with regard to FIRE and ETFs.

It's almost as if the state is, in some respects, trying to discourage people from thinking long term and planning for their future.

With regards to ETFs, I recently listened to an episode of a Podcast called the Irish FIRE Podcast in which ETFs were addressed. The presenter had two guests on from a a Group called Irish Savers Action Group. They outlined how they were trying to liaise with politicians to encourage long term personal financial planning. They have liaised with various political parties on the matter. With regard to ETFs they basically got told (not in so many words) that addressing the problem with ETFs would basically be politically unpalatable. It wouldn't play well with the voters. Even though it would be immeasurably beneficial for the majority of the public, the squeezed middle as it were, politicians won't touch it as it would have bad optics. In a way this is an understandable stance from a government party. Much of the Irish public is financially illiterate.

No matter how much of a benefit a change to the tax regime in relation to ETFs would be to the general public, can you imagine how the likes of far left politicians such as Paul Murphy, Brid Smith et al would actually distort reality on this matter?

I went off on a bit of a tangent/rant there, but I think it feeds into what you've been saying in relation to how we treat good personal financial planning in this country, and goes a bit towards explaining why we find it so difficulty to make any headway on these issues. Another example would be SF vilifying the government for trying to increase the pension age in Ireland, after they doing the exact same in the North - the definition of irony.

A big problem in this country is begrudgery - those who are reckless and do not plan for their future will begrudge and try to take from those that do. One of my biggest fears is much of my private pension being taken from me to give to those who weren't bothered planning for their future, or the PRSI pension becoming a means-tested allowance after 40 years of me contributing to it.

But back on point, I compare Ireland with the UK, as they are our closest neighbour. They are comparable in many ways, and by comparing the two, I think it highlights how unfair and out of step of tax system is in Ireland.

Re: The FIRE movement - I'm contributing as aggressively as I can to my pension (one thing that's very tax efficient here) and fully intend on retiring by 55. Contributing to a pension is doubly satisfactory - it reduces tax liability, and you are providing for your future,

pioneerpro · 25-02-2021 2:07am

Rothmans wrote: »

With regards to ETFs, I recently listened to an episode of a Podcast called the Irish FIRE Podcast in which ETFs were addressed.

Yeah I've been following your man on reddit from the very start. Fair play to him, and the /r/irishpersonalfinance/ is great albeit wildly depressing.

much of my private pension being taken from me...PRSI pension becoming a means-tested allowance

I have no illusion regarding a pension being available for me regardless of contributions. Half my generation are in UAE, Canada, or Australia and aren't paying stamps. They gutted the pension reserve fund already, and UBI is probably going to become a reality in the 1st world in the next 20 years. We're doing it already re: housing for inter-generational social welfare dependents, all at the expense of the squeezed middle.

Re: The FIRE movement - I'm contributing as aggressively as I can to my pension (one thing that's very tax efficient here) and fully intend on retiring by 55. Contributing to a pension is doubly satisfactory - it reduces tax liability, and you are providing for your future,

In the greatest bull market since the dot.com boom, my privately managed pension (and obligatory 4.5% of my gross) achieved a return of about 3% when everything was accounted for.

It is a scam, plain and simple. Fire and forget investing in the S&P returned 31.5% and 18.4% the last two years running. I'm not going quietly into that dark night anymore, and I need to make up for the loss of earnings from two recessions in my adult working life so far, and the incredible capital flight that resulted in the hyper-appreciation of property.

Rothmans · 25-02-2021 2:19am

pioneerpro wrote: »

Yeah I've been following your man on reddit from the very start. Fair play to him, and the /r/irishpersonalfinance/ is great albeit wildly depressing.

I have no illusion regarding a pension being available for me regardless of contributions. Half my generation are in UAE, Canada, or Australia and aren't paying stamps. They gutted the pension reserve fund already, and UBI is probably going to become a reality in the 1st world in the next 20 years. We're doing it already re: housing for inter-generational social welfare dependents, all at the expense of the squeezed middle.

Is that your way of saying our pensions will be safe? Or we'll just all be equally screwed?

In the greatest bull market since the dot.com boom, my privately managed pension (and obligatory 4.5% of my gross) achieved a return of about 3% when everything was accounted for.

It is a scam, plain and simple. Fire and forget investing in the S&P returned 31.5% and 18.4% the last two years running. I'm not going quietly into that dark night anymore, and I need to make up for the loss of earnings from two recessions in my adult working life so far, and the incredible capital flight that resulted in the hyper-appreciation of property.

3 % - That seems very poor. Actively managed? I achieved 7% last year, albeit in a level 5 fund. I've actually recently split my contributions over more funds, such that, 60% of my contributions are in level 6 and 7. Hoping for solid returns - I'm still (relatively young).

The way I look at it - even if the funds underperform a little, I'm still up in any given year given the tax advantages.

Do you mind me asking which company administer your fund? I'm with Irish life.

PaddyTheNth · 25-02-2021 10:57am

While I'm not naive enough to think we'll make a difference this time, I think it would be worth playing the game and making the decision makers explicitly ignore our feedback - the government is running a public consultation on this at the moment. Naturally it isn't asking about the specific issues raised in the recent posts, but there is free-form feedback in a few places which can be used to highlight changes which would enable people to take more responsibility for providing for their financial security later in life.

https://ec.europa.eu/eusurvey/runner/PensionsCommissionSurvey2021

Keep your feedback concise and to the point!

pioneerpro · 25-02-2021 12:27pm

Rothmans wrote: »

Is that your way of saying our pensions will be safe? Or we'll just all be equally screwed?

The current pension liabilities - i.e. the people who are currently claiming - were no where remotely near funded based on the contributions made in their working life. In particular areas of public services it's almost a 4:1 deficit. The current 18-40 generation are basically shouldering that entire burden via tax take, whilst getting screwed re:defined benefit/defined contribution changes to pension schemes.

https://www.irishtimes.com/business/financial-services/public-sector-pensions-worth-millions-new-figures-show-1.3143604

Add to this the utterly macabre charade of large tracts of council housing being sold back for pennies on the euro during the 80s, and NIMBYism and regressive housing policies throughout the last 30 years and we have a generation who are both accelerating capital flight to the generations that came before them as well as shouldering almost the entire burden of their social welfare and medical expenses!

Indeed, we now have the situation where the sort of artisan cottages and public/private partnership houses built to lift us out of extreme poverty in the first half of the 20th century are now pushing 10-15 times the median income... and its to do with property being culturally seen as the *only* investment vehicle suitable for the common man; a position tacitly reinforced by our taxation regime and acceptance thereof.

With the historic propensity for the government to just help themselves to pension related funds during times of mismanagement/recession, I simply can't see anything other than the overall 'socialisation' of this and a societal penalisation of anyone who strived to generate any sort of wealth that doesn't involve property or inter-generational hand downs.

3 % - That seems very poor...Do you mind me asking which company administer your fund? I'm with Irish life.

Mercer. And that was my ballpark after fees and whatever else were taken IIRC. Must dig out the last mail they sent.

Crimson_Ghost · 01-03-2021 4:45pm

Thanks All for your comments and information above.

As part of my query I did say to Revenue that I was looking into Day Trading as a way to generate income and asked whether this should be liable to income tax or CGT before moving on to the write off query for CGT. I said this would involve buying and selling securities same day. They came back and said it would be liable to CGT.

Are you saying in the above comments that I could go ahead and classify it as liable to income tax rather than CGT myself and just do the return on that basis? And in this way write off short term losses against short term gains?

I would not bother me having to pay 50% tax vs. 33% if I knew for definite that losses could be written against gains for short term trading.

It is infuriating that a possible income and tax generating endeavour might be stopped in it's tracks because of our tax system not being as developed as others. Also the contempt with which the media here, and people in general to be honest (one example being the article above) treat short term trading is appalling. Especially given the hypocrisy of it - i.e. that small retail traders provide a lot of the liquidity in market that lets funds, pensions, market makers etc. move in and out of their own positions more easily.

Crimson_Ghost · 01-03-2021 4:48pm

pioneerpro wrote: »

A civil servant won't give you tax advice in this context and possibly open themselves up to liability. I'd say registered financial advisor or you're pissing in the wind. I've taken the 4 week rule to heart, for better or worse, and just acknowledged Ireland doesn't want you to build wealth like other countries (€1,270 CGT threshold? Jokable). You've presumably seen this bloody article recently calling for a speculation tax. Sickening.

https://www.thejournal.ie/readme/column-gamestop-financial-transactions-tax-victor-duggan-5346346-Feb2021/

I've actually gone to 2 and they couldn't answer specifically. The real experts in the area might only deal with the big corporations to be honest.

Ryaner · 02-03-2021 12:58am

Rothmans wrote: »

And I absolutely with all of your points. Especially with regard to FIRE and ETFs.

It's almost as if the state is, in some respects, trying to discourage people from thinking long term and planning for their future.

With regards to ETFs, I recently listened to an episode of a Podcast called the Irish FIRE Podcast in which ETFs were addressed. The presenter had two guests on from a a Group called Irish Savers Action Group. They outlined how they were trying to liaise with politicians to encourage long term personal financial planning. They have liaised with various political parties on the matter. With regard to ETFs they basically got told (not in so many words) that addressing the problem with ETFs would basically be politically unpalatable. It wouldn't play well with the voters. Even though it would be immeasurably beneficial for the majority of the public, the squeezed middle as it were, politicians won't touch it as it would have bad optics. In a way this is an understandable stance from a government party. Much of the Irish public is financially illiterate.

No matter how much of a benefit a change to the tax regime in relation to ETFs would be to the general public, can you imagine how the likes of far left politicians such as Paul Murphy, Brid Smith et al would actually distort reality on this matter?

I personally hope these people get their act together and realise the effective timebomb that is building in this area. Specifically around how vague the Revenue is being on exactly how to calculate gains and picking and choosing the parts that benefit themselves only. The last few years have seen a much larger amount of people buying ETFs via the low and free commission brokers, and people are in for a pretty nasty surprise when they find out that each transaction is meant to be treated as a separate investment.

Do 12 monthly purchases? That'll be 12 calculations if selling or doing deemed disposals.
Did 6 make a profit and 6 make a loss? You owe tax on the 6 that made a profit with no loss relief for those that made a profit.

Crimson_Ghost · 02-03-2021 6:39pm

This is ridiculous. It's not in the spirit of tax law to have to pay tax on a profit on an event where a loss on an equivalent event can't be offset. I'm querying it directly with them and will continue to probe but there are other avenues too if I get nowhere with this.

If they have problems with Short term trading and CGT then they need to state explicitly that it is trading, dealing and liable to Income Tax instead and losses are allowable here. But they won't even say this because it's shares.

I wonder if there is any individual out there doing this and submitting income tax returns vs. CGT where Revenue are happy with this. Does anybody know?

pioneerpro · 02-03-2021 6:58pm

Crimson_Ghost wrote: »

This is ridiculous. It's not in the spirit of tax law...

I'm afraid that's up to them and the courts to decide. It's apparently unchallenged as far as I can tell.

https://www.revenue.ie/en/tax-professionals/tdm/income-tax-capital-gains-tax-corporation-tax/part-19/19-04-06a.pdf

Crimson_Ghost · 02-03-2021 7:13pm

That document you attached - it doesn't tie back to the actual wording in the Tax Act S 581
the Act states that losses are only limited where the same shares are repurchased within 4 weeks of realising the loss and can only be offset against any gain on those same shares.

But if I don't repurchase (say Share A)?, where in the Act does it say I can't offset the loss on Share A (a same day buy and sell for example) against another gain separate from these shares (gains on dealing in Share

? I can only see that it says I can't offset A against B on their website - no where else.

Even the document above you attached doesn't talk about this restriction. Although I think they've also misinterpreted the act for this document.

Ryaner · 02-03-2021 7:19pm

pioneerpro wrote: »

I'm afraid that's up to them and the courts to decide. It's apparently unchallenged as far as I can tell.

https://www.revenue.ie/en/tax-professionals/tdm/income-tax-capital-gains-tax-corporation-tax/part-19/19-04-06a.pdf

The FIFO rule itself makes perfect sense and isn't the issue here. It is how they want that applied, with no loss relief between purchases of the exact same shares of an ETF.

I've still not gotten my head around how they want to apply different logic to shares in a company and shares in ETFs. Everytime I think I understand what they mean, another section contradicts it.

Crimson_Ghost · 02-03-2021 7:32pm

I haven't really looked into anything other than simple share dealing but I would have thought ETF is deemed a "security" and treated in the same way as a share. But as I say I haven't looked into ETF at all.

In terms of the 4 week rule (& repurchasing aspect) - if I made a loss I just wouldn't rebuy the same thing until after 4 weeks of date incurring that loss. The rule is stupid here too (given it's not fit for purpose if people are just trading honestly instead of trying to benefit at year end from the 1270 exemption buy realising losses and rebuying) but at least it is in line with the act.

ronivek · 02-03-2021 7:58pm

I'm in the same boat at the moment trying to figure out how this 4-week rule applies; and to what investment instruments.

I suspect as noted somewhere above that the intention here might be to ensure people who are actively trading are forced to operate within the Income Tax regime whilst people who are investing are operating within the Capital Gains regime.

Is anyone on this forum actually day trading in Ireland? Does anyone know of anyone who does so and would be willing to pass on some contact details? Or indeed any tax or financial professionals who actually have knowledge and/or experience on the topic? I have yet to find either.

Crimson_Ghost · 02-03-2021 8:58pm

I'm happy to be forced into the Income Tax regime if only Revenue would confirm this for me and if I can offset short term losses against gains.

Buy they are saying because it is shares it is CGT. I suspect this could be open to discussion so I'll be re-querying this with them again.

In any case the more queries Revenue get in writing the better as it will show there are more and more people doing this.....

Ryaner · 03-03-2021 4:40pm

In the last day or so the 27-01a-03 manual on ETFs has changed to be unavailable as it is being updated - https://www.revenue.ie/en/tax-professionals/tdm/income-tax-capital-gains-tax-corporation-tax/part-27/index.aspx. Not something I've seen before but maybe Revenue are taking action after the many queries over the last while. We can only hope.

Crimson_Ghost · 22-03-2021 7:28pm

I'm still waiting to hear back from Revenue. I rang numerous times and was redirected and/or was cut off.

Was there any word back on getting an article in the IT?

AlkalineAcid · 30-04-2021 1:46pm

It seems unreasonable that you cannot offset losses against gains unless it is exactly like the American wash sale rule in which the losses adjust your cost basis if you buy the stock again within a month.

Any news, Crimson_Ghost?

LawBoy2018 · 30-04-2021 3:46pm

AlkalineAcid wrote: »

It seems unreasonable that you cannot offset losses against gains unless it is exactly like the American wash sale rule in which the losses adjust your cost basis if you buy the stock again within a month.

Any news, Crimson_Ghost?

It's true, you can't. You need to wait 30 days.

inisfree0504 · 30-04-2021 10:07pm

LawBoy2018 wrote: »

It's true, you can't. You need to wait 30 days.

As you are 'lawboy', do you happen to have access to Maguire, Irish Capital Gains Tax? I haven't been back in the college library to have a look. I'm sure it would have a passage on this if there was any ambiguity.

Day Trading & CGT

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