The Badges of Trade
Are you still carrying on a hobby or in fact trading? What’s the law on this?
You may carry on thinking what you are doing is a hobby or a little cottage industry hidden from the wider world.
But when does it become a real profit-making venture or business and when do you need to declare it?
Well there is no legal definition of a trade or even self- employment but below are some of the criteria you should consider to help you decide what side of the invisible line you fall.
The man in the pub will certainly not know the real answer!
The courts have considered these sample questions below over many years and this is what HMRC use to rely on:
The badges of trade
- Profit-seeking motive: is there an intention to make a profit
- The number of transactions: systematic and repeated transactions of some volume will suggest a trade.
- Have you acquired assets for resale which would suggest trading,
- Is what you are doing similar to the transaction of your existing trade as this may indicate trading e.g., selling things ancillary to you main lines or by-products of them.
- Has the stock been modified, altered, or improved to make it saleable at a profit?
- How do you organise the sales of your goods? Is it in the usual course of a trading concern like a market stall, shop, online or by using advertising
- Did you borrow to finance the business? Amazon provide business loans to their traders.
- Do you turn round goods quickly
This is not merely a tick box list, and you need to stand back and look at the bigger picture.
Call Lindsay on 07584 706 664 to talk though any issues that may be of concern to you for a friendly chat.
