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Do you know the nature of your share dealing profit? Here are 4 things to consider

by , 06 November 2015
You can hold shares to make money.

You hold on to them and get benefits in the form of capital growth and dividends. Or you might look at selling to make profits on the movement of prices.

The tax consequences here revolve around whether the gains or losses you receive are of a capital or revenue nature.

If there's a dispute, which could very well arise, you'll have to prove an amount is of a capital or revenue nature. This will be based on a balance of probabilities.

Here are 4 factors the courts will consider to establish the probability of the nature of the share dealing profit:

1. Your primary intention at the time of purchasing and selling the shares
If you buy shares as a long-term investment to produce dividends income, then the profit is probably of a capital nature.
But if you buy them to resell them at a profit, then it's of a revenue nature.

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2. The period of holding the shares.
The longer you hold on to the shares, the more likely they are of a capital nature.
3. The scale and frequency of the share transactions
If the share transactions are frequent and of a large scale, then they most likely of a revenue nature.
4. The potential return
If the shares you buy don't produce dividends, or of the business that holds the shares is risky, then the proceeds are more than likely of a revenue nature.
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