Avoiding HMRC hassle

[9mm]

Short story, I want to start another business which will coincidentally provide some personal benefits in addition to income, but not as in bik. Thing is, I don't want to fall foul of HMRC deciding that this isn't a business at all, it's my hobby or somesuch interpretation. It's nothing like as straightforward as that or I wouldn't even be asking the question.

The advice I've had is to ensure the business is set up to make a profit (it will be, with advertising, website, etc) and I can answer the question "how do you live if this business makes no money" without any problems. I also understand that HMRC will only have so much patience with a business that is making a loss (in that will it ever make a profit) especially if those losses are being offset elsewhere. What I'm expecting is break even in year one and small growth over the next couple of years. No losses predicted or envisaged!

So all I'm asking if anyone else has been in a similar position and can offer any advice, particularly in the setting up stage to underline the legitimacy of the business.

[PurpleMoonlight]

Is this an escort agency by any chance?

[9mm]

Not those kinds of benefits! Think more like a nursery and I like plants. And before you ask, no it isn't a cannabis farm!

[PurpleMoonlight]

9mm said:

Not those kinds of benefits! Think more like a nursery and I like plants. And before you ask, no it isn't a cannabis farm!

I wangled 6 Labradors as a side line to my main business once. It was 20 years ago though. I was going to breed them. Had them on the books for several years but no puppies alas. Only issue I ever had with HMRC was them querying a digital camera, this was the early days of digital cameras and they were expensive. I got it through claiming it was to photograph the dogs and puppies for my website.

Still have that camera in a cupboard too.

[Eric Mc]

If it's making a profit, HMRC will have no problem deciding it's a business.

If it makes a loss, it can still be a business but if it mopes along for ab few years never showing any signs of making a profit HMRC may decide that it isn't a business and never was and may then seek to recover from you any tax refunds you may have obtained through the use of trading loss relief.

I did have such a situation a good few years ago with one of my clients but we were able to persuade HMRC that my client was just running a rubbishy business.

[9mm]

Eric Mc said:

If it's making a profit, HMRC will have no problem deciding it's a business.

If it makes a loss, it can still be a business but if it mopes along for ab few years never showing any signs of making a profit HMRC may decide that it isn't a business and never was and may then seek to recover from you any tax refunds you may have obtained through the use of trading loss relief.

I did have such a situation a good few years ago with one of my clients but we were able to persuade HMRC that my client was just running a rubbishy business.

Thank you Eric.

I thought it would be relatively straightforward and it sounds as if the advice I have been given is correct. TBH I can't see any prospect (I'm sure everyone says this but still) of consistent losses and if that was the case I'd want to bail not try and offset them against other liabilities.

[Eric Mc]

In many ways HMRC are very happy for you to stay schtum as long as it is generating losses. They won't like you making profits and not telling them - obviously.