Sometimes it may not be clear when a hobby becomes a trade/business. HMRC have put together a helpful list of what they call ‘badges of trade’. None of these are conclusive but, if you meet more than one, it is likely that you have a business and should register as self- employed.
- You intend to make a profit
- Systematic and repeated transactions may indicate that you have a ‘trade’
- Are you selling something that could only benefit you by being sold rather than something that might give you ‘pride in possession’ such as a beautiful picture you enjoyed personally?
- If your transactions are similar to those of an existing trade, then you may well be trading
- Was the asset repaired, modified or improved to make it more easily saleable or saleable at a greater profit?
- Was the asset sold in the same way as a trading organisation rather than a forced sale to raise cash?
- Was money borrowed to pay for the asset? And was sale of the asset the only way to repay that funding?
- Was the asset bought and sold within a short space of time
- Was the asset purchased rather than an inheritance or gift?
If it is not clear, then the courts will decide based on the overall impression when they review all these badges.