A reminder – HMRC’s badges of trade
23/12/2021

The 'badges of trade' tests whilst not conclusive are used by HMRC to help determine whether an activity is a proper economic trade / business activity or merely a money-making by-product of a hobby.

The approach by the courts in using the badges of trade has been to decide questions of trade on the basis of the overall impression gained from a review of all the badges.

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

Even if HMRC consider that the activities in question are a trade, taxpayers can make up to £1,000 per year tax-free by claiming the trading allowance.


Central London Office

5th Floor, Watson House
54-60 Baker Street, London
W1U 7BU
Phone: 020 7493 7302
Fax: 020 7493 4120
Email: info@king-king.co.uk

North West London Office

1st Floor
65 - 67 Wembley Hill Road
Wembley
Middlesex
HA9 8DP
Tel: +44 (0) 20 8902 7451

Memberships

Newsfeed Search