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When does your hobby become a business?

Author: Mark Thomas
Date: 6th October 2015
Tags: HMRC

Whatever the activity, if it makes you a financial profit, HMRC will be interested, says Mark Thomas. HMRC are using new powers to force online marketplaces such as eBay, Etsy, Amazon and Gumtree to hand over customer account details, including their sales activity. This information gathering has enabled the taxman to target at least 14,000 individuals it suspects of failing to declare profits on their self-assessment tax returns.

Using extensive new powers introduced last year, HMRC can download people’s account information and even force sellers to pay tax that is disputed or subject to an inquiry.  One eBayer who turned over an undeclared £1.4m in six years was jailed for two years, in a high-profile case designed to discourage other would-be tax evaders.

What is the dividing line between a hobby and business?

You may consider selling second-hand items and hand-make crafts online to be an innocent hobby, but HMRC will class you as a business if it can show that you are doing “anything in the nature of trade”.

If you buy items and then resell them in a short period of time, or sell home-made crafts online, you could be classed as a business.  The dividing line is contentious, but profit is one of the main triggers to get the taxman interested in you in the first place.

If you are in any doubt about your position in relation to this matter, please talk to your usual Thomas Croft contact as soon as possible.

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