Tier 1 (General) Previous Earnings

[mxs]

I am self employed. I earn my income by trading my own savings in the US stock market through a brokerage account. This past year, I earned enough money to apply for a Tier 1 Visa if my short-term and long-term capital gains are included. I can demonstrate earnings with an accountant letter, and my account statements, which are in my name through Charles Schwab. Will this be sufficient proof of income? Much thanks

[silverline]

1. Are you registered in UK as self-employed?
2. Did you pay Capital Gain tax in the UK or US?
3. Is your brokerage account subject to UK regulations or US?
4. Are you under Tier 1 (General) or (Investor)?

[mxs]

1. I am not registered in the UK as I reside in the US
2. I will pay capital gains taxes in the US on all of the income generated
3. The brokerage account is subject to US regulations
4. I currently have no visa for the UK. I will be a new applicant

[gordon]

I think the challenge will be for you to demonstrate that these earnings are from a business that you run or from employment, rather than merely unearned income (which is what they would otherwise appear to be, at least to me).

[mxs]

Thanks for the insight gordon. I actively trade (at least 30 trades this year), and my previous experience is in investment management. Any suggestions on how to demonstrate these earnings are from self-employment?

[silverline]

Thanks for the insight gordon. I actively trade (at least 30 trades this year), and my previous experience is in investment management. Any suggestions on how to demonstrate these earnings are from self-employment?

MXS

It's a bit tricky...

Your surely needs to prove that you earned these Capital Gains as part of your business activity not a passive investment. You appear to have been earning these gains in individual capacity. Tax docs, bank Statements, dividend vouchers, brokerage statement would help to prove but a fundamental question here is how to prove it was all your business activity. Per policy guidance, diviends are qualified source of earnings only if paid by a company in which the applicant is active in the day to day management.

Say you setup ABC firm and that ABC(yourself) do all the trading in the shares of XYZ & QRT & earn both dividends & capital gains out of such trading activity. Now you can take all the income of ABC in the form of dividends in "ABC" & use it as earnings for Tier 1 purpose. I doubt you can directly claim earning points for XYZ & QRT dividends/Capital Gains.

looking forward to other opinions!!!

[mxs]

this is good insight. what differentiates a passive and active investor? the brokerage houses quantify this by the number of trades made per year. Both Schwab and Fidelity set that as a minimum of 36 trades. See footnote 3 below:
http://www.schwab.com/public/schwab/inv ... ducts/etfs

So I guess if I've made more than 36 trades, then that will help my case?

I agree that I won't be able to count the dividends from XYZ, but let me give two other examples:
1. I bought $4,000 of XYZ in 2009 and sold it for $5,000 in 2010. I have earned $1000 in gross income, but taxed at 15% in long-term capital gains. The IRS does not mark-to-market and recognizes all income in the year of sale. Does the income get split in the Border Agency's mind 50/50 in 2009 and 2010, or is it all recognized in 2010? Or, do they not include that as income at all?
2. I bought $10,000 of ABC in 2010 and sold it for $12,000 in 2010. This is taxed at the ordinary income tax rate, and is surely active trading. I don't see any argument as to why this wouldn't count as income of $2,000

Looking forward to your responses.

Much thanks

[Sushil-ACCA]

can u provide more light

it is ltd company brogerage a/c or personal brokerage a/c

is this money u earned for yr clients or self - if u can prove that u r a trader and having finace portfolia for yr clients also

life may be easy , subject to earning in a/c

[silverline]

[quote="I am self employed. I earn my income by trading my own savings in the US stock market through a brokerage account[/quote]

@Shushil he is probably running a peronal brokerage a/c .

@Mxs I persume tax on these captial gains must have been deducted at source but do you file any sort of annual tax return e.g self assessment etc for such Capital Gains etc?

If so then how you classify your income in your tax return i.e. "Business Income" or "Investment Income"?

[mxs]

It's a personal brokerage account. On the IRS 1040, it would be the equivalent to line 13, capital gains. It is all broken down in Schedule D at the end of the tax year. For the purposes of the visa application, I feel like my brokerage account statements and a letter from my accountant verifying the amount should be sufficient? There is pretty much nothing else I can provide anyways

[geriatrix]

Someone can sell a house, pay capital gains tax on the sale .. and claim the sale of an asset to be his / her income. Income from sale of assets may be considered if the selling assets is a business and one earns through such a business.

An analogy cited in the policy guidance is that of rental income.

IMHO ....



regards

[silverline]

Someone can sell a house, pay capital gains tax on the sale .. and claim the sale of an asset to be his / her income. Income from sale of assets may be considered if the selling assets is a business and one earns through such a business.

An analogy cited in the policy guidance is that of rental income.

IMHO ....



regards

sushdmehta is correct

@Mxs
As said earlier, you need to prove somehow that it's your all your business activity.

"more than 36 trades" is something which may or may not be acceptable in this case but any letter from your broker stating that you are active investor might help".

You can also explain it in cover letter that it's your only income source and business income as a self-employed.

If you have some sort of tax document which state it as business income might also help.

In nutshell, unfortunately, IMHO chances of your success aren't very promising.


Best of Luck!!