Revenue sharing agreement from day trading company
Question: A UK Trading Company has been approached by a US Day Trading Company to develop and test automated trading software on their behalf. In return the US Company has offered a revenue sharing agreement on profits over and above their current levels. (note: The UK company would not actually be trading on behalf of the US company.) The US Company day trades US Futures, Stocks, Options, FOREX and Bonds. A revenue sharing agreement would use 'Incremental Gross Revenue post commissions' and apply a % revenue share according to the agreement. (It is believed that the US Company would be charged Federal tax at source on all its trading profits - and that it would need to apply for a tax credit against tax paid on trading profits which became revenue sharing charges that were paid to the UK company.) For the purposes of UK tax, what rate of tax would be applicable from the revenue sharing agreement? Would the revenue sharing payments be charged as income irrespective of whether the revenue came from Futures, FOREX, Stock, Bond or FOREX day trades? If the UK company is paid in $USD, would the tax liability be determined based upon that months revenue sharing payment and average $/£ rate that month? How would this be treated if the Company received payments on a quarterly basis? Is the standard per the hmrc.gov website? This seems to be for customs, while exchange rates are available weekly? . . . (to read the remainder of this article, please log in below.)
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