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Q: My client has received a letter from HMRC following the sale of some puppies several years ago, when circa £12,000 was received. This was a complete one-off when the family pet produced a litter which was advertised for sale on Facebook Marketplace. He is a scaffolder by trade. Is the income taxable?

A: HMRC’s Business Income Manual (BIM) addresses this issue in two sections. The guidance at BIM20090 discusses "hobbies and artificial trades", focusing on denying loss relief when a profit in one year is claimed to justify trading losses in other years.

More detailed guidance at BIM20205 describes the badges of trade.

Relevant factors for your client include:

  • Number of transactions.Nature of the asset.
  • Similar trading transactions or interests.
  • How the sale was conducted.

According to HMRC, it is essential to ascertain all relevant facts to decide whether an activity constitutes a trade. Considering the aforementioned factors, your client's activities are more likely to be viewed as a hobby rather than a trade.

Disclaimer

These publications from Markel Tax were correct at the time of going to press and should be considered as principles-based guidance only. To check current validity, call the Markel Tax helpline. ICAEW (as distributor) disclaims all liability for any errors or omissions.

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