Please advise how to disclose a CFD trading loss from Investec on the IT12? Is it local business trade or a capital loss?
Important:
This answer is based on tax law for the year ending 28 February 2020.
Answer:
We accept that with CFD, you refer to “contracts for differences” – arrangements made in a futures contract whereby differences in settlement are made through cash payments, rather than by the delivery of physical goods or securities – are categorized as leveraged products. The cash payments are often referred to as margin calls.
It depends on the intention of the taxpayer, but we suspect that the taxpayer’s intention was more likely than not speculative. It would then be accounted for as ‘business income’ in the ITR12.
Because of the very nature of these contracts, primarily the high risk of losses, we submit that the taxpayer will find it difficult to meet the onus to prove that it was done with a capital intent. SARS may, or probably will, request relevant material here and the taxpayer may well be called on to provide reasons why a trade is in fact carried on – should be easy to do.