HMRC – Am I Trading or Not?


Trading or Not? This helpful guide will provide you with information
to help you decide whether you are trading. It gives some practical examples and tells
you what to do next. Here are some questions to ask yourself. If
you decide that one or more applies to you, then you are likely to be trading. Do you wish to make a profit? If you sell
because you intend to make a profit then you are likely to be trading. You are unlikely
to be trading if you are just trying to cover your costs. Repeated sales. If you sell items on a regular
basis, or you sell a similar item on more than one occasion over a period of a year,
then you will be more than likely trading. However, even a one-off transaction could
involve a trade if you do it in a way a trader would. Is what you are selling yours? If you bought
something with the purpose of selling it then this is likely to be classified as trading.
If you had personal enjoyment from the item then you are unlikely to be trading. Do you already have a trade? If you are already
selling something in a shop and you now sell that product or something similar online you
are more likely to be trading. Have you changed the item? If you have made
any changes to the item (including repairing it) in order to sell it on at a profit then
you are likely to be trading. How did you sell the item? If the item was
sold in an online shop then you are likely to be trading. How was the item bought? If you buy items
with a loan or other borrowed finance and it can only be repaid if the item is sold,
then you are likely to be trading. How quickly was the item sold? If you buy
items and quickly sell them on with the intention to make a profit this is likely to indicate
that you are trading. How was the item acquired? If you sell something
that you inherited or were given as a gift, it is unlikely that you are trading. However
if its value exceeds £6,000 you may be liable to Capital Gains Tax. Let’s meet Sally. Sally clears out her attic,
and decides to sell her unwanted items online. Sally had no intention of making a profit
from selling the items, so she is unlikely to be trading. As she’s not trading there
will be no need for her to register with HMRC. Next we meet Gina. Gina works full time as
a nurse and is also into her arts and crafts. In her spare time she makes greetings cards
for family and friends. People like her cards and it has been suggested that she sells them
online. At first she sells the cards at cost price, but as business is brisk, and so that
she can pay for her holiday, Gina starts to add a little on to the price of the cards.
Within a few weeks Gina is making a profit. Gina is trading as she is now selling with
the intention of making a profit, whereas before she was merely making things for family
and friends as a personal hobby. Gina should keep a record of her expenses and purchases
and register with HMRC. Next David. David collects toy cars. He sometimes
buys and sells them but he also looks for swaps. The swaps are designed to complete
a particular set of cars which David knows will be more valuable as a set than as individuals.
Once he has a complete set, he offers it for sale or swap. David does not buy everything
he sells but he is swapping things so he can make a profit. Bartering like this is likely
to be trading and David should register with HMRC. And finally Steve. Steve imports cameras and
accessories on a regular basis from the Far East and sells them online, making a profit.
Steve is trading as he makes a profit and sells regularly. He should keep his tax affairs
up to date and register with HMRC. For more helpful information about trading,
what to do if you are trading and how to notify HMRC, go to the link shown here.

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