Tax exempt 'business'
Discussion
While watching TV the other day I see a woman who's made half a million pounds profit from property as a 'hobby'!
I know that personal residence, car and £8000 or profit per year can be made from belongings but at what point does it become a business and not a hobby?
I'm thinking I need a hobby and one that'll make aprofit of half a mill' would be handy.
I know that personal residence, car and £8000 or profit per year can be made from belongings but at what point does it become a business and not a hobby?
I'm thinking I need a hobby and one that'll make aprofit of half a mill' would be handy.
The taxman's defintion of a hobby is an activity that costs you. If it makes money for you, it's either a business or a chargeable gain.
They will even argue sometimes that persistent loss making businesses are actually hobbies - in an attempt to block the offset of trading losses. They tried that on with a client of mine. Needless to say, I sent them packing.
They will even argue sometimes that persistent loss making businesses are actually hobbies - in an attempt to block the offset of trading losses. They tried that on with a client of mine. Needless to say, I sent them packing.
Depends a lot on how many properties you have and how you dispose of them. If, for instance I bought another house without selling my current house. IIRC, I have a small 'window' of overlap where I can sell my former private residence and not be slugged CGT on it.
I think if I lived in the new house for, say, 6 months and was then compelled to sell it becasue I could not sell house #1, I may be exempt - as house #2 had become my private residence.
I cannot recall the statutory minimum occupation period for it to qualify hause private residence.
All these are not very convenient/fun if you have wife & kids etc - not fun to shift a family every 9 months to avoid tax.
I think if I lived in the new house for, say, 6 months and was then compelled to sell it becasue I could not sell house #1, I may be exempt - as house #2 had become my private residence.
I cannot recall the statutory minimum occupation period for it to qualify hause private residence.
All these are not very convenient/fun if you have wife & kids etc - not fun to shift a family every 9 months to avoid tax.
As far as I know there is no statutory time limit for defining when a property becomes your PPR. In fact, the HMRC rules are quite flexible and allow you to make certain elections so that you can actually chose which property is your PPR. They will even allow you to reverse an election if you later change your mind - as long as it is done within certain time limits (which are themselves quite generous).
What HMRC are more concerned about is when somebody is obviously running a property development business rather than just "doing up" their PPR or one other property.
What HMRC are more concerned about is when somebody is obviously running a property development business rather than just "doing up" their PPR or one other property.
Eric Mc said:
What HMRC are more concerned about is when somebody is obviously running a property development business rather than just "doing up" their PPR or one other property.
Yes, this is what I'm talking about. People giving up there day job to pursue a 'hobby'.
At what point does the man who's selling his own private cars become a trader 'with all the associated costs such as VAT', the couple doing up the odd house and avoiding what must be enormous tax bills in the process as it's just a 'hobby'.
My business suffers as many people sell similar items to myself on ebay but without the tax/vat/insurance etc.
Maybe a flat tax system would be the way forward and remove any doubt about ones tax liabilities.
Once you start making money on an activity, the tax man will consider that you are trading. Carrying out an activity with a view to making a profit is considered to be the legal definition of trading. There are some specific exemptions from this - selling house contents at a car boot sale, selling your old car etc.
However, once you start performing these activities on a frequent basis and you start making money, then you had better consider notifying HMRC that you are now running a business.
That's one of the main reasons why HMRC officers are now becoming frequent visitors to car boot sales - or trawling through e-bay.
However, once you start performing these activities on a frequent basis and you start making money, then you had better consider notifying HMRC that you are now running a business.
That's one of the main reasons why HMRC officers are now becoming frequent visitors to car boot sales - or trawling through e-bay.
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