Search News


 

News

Lloyd & Co
Chartered Accountants

103-105 Brighton Road
Coulsdon
Surrey, CR5 2NG
020 8668 0500
This email address is being protected from spambots. You need JavaScript enabled to view it.

Source: HM Revenue & Customs | | 13/03/2019

The 'badges of trade' tests, whilst not conclusive, are used by HMRC to help determine whether an activity is a proper economic / business activity or merely a money-making side line to a hobby. Careful consideration needs to be given when deciding if a hobby has become a taxable activity.

It is clear from the significant amount of case law on this subject that a decision on whether there is a business activity is often not clear. In fact, both HMRC and the courts are of the opinion that it is important to look at the whole picture rather than looking at each 'badge' in isolation or even relying too heavily on the badges of trade at all. In some cases, taxpayers will seek to argue that their hobby is actually a trade in order to benefit from certain tax reliefs, usually related to utilising a trading loss.

HMRC will consider the following nine badges of trade as part of their overall investigation as to whether a hobby is actually a trade:

  • Profit-seeking motive
  • The number of transactions
  • The nature of the asset
  • Existence of similar trading transactions or interests
  • Changes to the asset
  • The way the sale was carried out
  • The source of finance
  • Interval of time between purchase and sale
  • Method of acquisition

The introduction of the trading allowance in April 2017 allows taxpayers to make small amounts of money from their hobby. Even if HMRC consider that the activities in question are a trade, taxpayers can make up to £1,000 per year from their hobby tax-free.



Latest News

Tenth anniversary of first Debt Relief Order
16/04/2019 - More...
Debt Relief Orders (DROs) were first introduced in April 2019. The DROs assist people who have small levels of assets

Estate Agents targeted
16/04/2019 - More...
HMRC has launched an unannounced crackdown on money laundering regulation non-compliance by estate agents. This

Job related expenses you can claim against your tax
16/04/2019 - More...
If you are an employee and use your own money to buy things that you need for your job, you may be able to claim tax