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Compliance Matters
Friday, June 3rd, 2011
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HMRC are well aware that some industry sectors have a poor record of compliance. But they are now taking a close look at trading on the internet and it is possible that some readers may be “trading” without actually realising it.
HMRC guidance states that “If you are just selling some unwanted items that have been lying around in the attic, the answer is probably no. In order to pay tax on the goods you sell, you either have to be trading or make a capital gain. If you are trading you will be self-employed”.
HMRC have nine badges or indicators of trading
| Indicators of Trading | Points to Consider |
| 1. Profit-seeking motive | An intention to make a profit supports trading |
| 2. The number of transactions involved | Systematic and repeated transactions support trade |
| 3. The nature of the goods sold | Are the goods only capable of being turned to advantage by being sold? Or do they yield income, or give enjoyment through pride of ownership? |
| 4. Existence of similar trading transactions | Was this a one-off transaction or part of a pattern that suggests trading? |
| 5. Changes to the goods | Were the goods repaired, modified or improved to sell them more easily? |
| 6. The way the sale was carried out | Were the goods sold in a way that indicates trading, or to raise cash in an emergency? |
| 7. The source of finance | Was money borrowed to buy the goods? Were any profits to be used to repay the loan? |
| 8. Interval of time between purchase and sale | Goods being traded are usually bought then sold quickly |
| 9. Method of acquisition of the goods | Goods acquired by an inheritance, or as a gift, are less likely to be the subject of trade |
So, the question is, are any of our readers at risk of being seen to be trading when they are only indulging in an interest?
Further information:
http://www.hmrc.gov.uk/guidance/selling/income.htm
