We have received enquiries from a number of clients, concerned that HMRC is going to try and tax them for the small amounts of cash that they make from pursuing hobbies. For example, buying and selling on eBay or setting up stalls at their local drive in markets – car boot sales.

If you establish a regular pattern of making money in this way, and in fact turn in a profit, then you probably need to consider if your hobby is a business that you need to declare to HMRC. Each case needs to be considered on its own merits.

HMRC follows a number of guidelines called “the badges of trade” that help them reach a conclusion: is a part-time hobby, that creates an income stream, a business that needs to be declared on an annual tax return? These badges of trade are listed below:

1.    An intention to make a profit supports trading, but by itself is not conclusive.

2.    Is the asset of such a type or amount that it can only be turned to advantage by a sale? Or did it yield an income or give ‘pride of possession’, for example, a picture for personal enjoyment?

3.    Transactions that are similar to those of an existing trade may themselves be trading.

4.    Was the asset repaired, modified or improved to make it more easily saleable or saleable at a greater profit?

5.    Was the asset sold in a way that was typical of trading organisations? Alternatively, did it have to be sold to raise cash for an emergency?

6.    Was money borrowed to buy the asset? Could the funds only be repaid by selling the asset?

7.    Assets that are the subject of trade will normally, but not always, be sold quickly. Therefore, an intention to resell an asset shortly after purchase will support trading. However, an asset, which is to be held indefinitely, is much less likely to be a subject of trade.

8.    An asset that is acquired by inheritance, or as a gift, is less likely to be the subject of trade.

These criteria are not the only aspects of activity that will be considered. Please call if you are concerned that your hobby may be considered a trade.

Also, please note that from April 2017, the government is to introduce a new £1,000 allowance for property income and a £1,000 allowance for trading income. Individuals with property income or trading income below £1,000 will no longer need to declare or pay tax on that income. Those with income above the allowance will be able to calculate their taxable profit either by deducting their expenses in the normal way or by simply deducting the relevant allowance. So, if your hobby does not produce income above £1,000, it can be ignored for tax purposes after 5 April 2017.

Prime Minister Teresa May was full of praise for the announcement from Nissan, and its continuing investment in their Sunderland plant, earlier this week. She said:

This is fantastic news for the UK. Nissan is at the heart of this country’s strong automotive industry and so I welcome their decision to produce the Qashqai and a new model at their Sunderland plant.

It is a recognition that the government is committed to creating and supporting the right conditions for the automotive industry so it continues to grow – now and in the future. This vote of confidence shows Britain is open for business and that we remain an outward-looking, world-leading nation.

The government will continue to work closely with employers and investors in creating a global Britain, a country where there are new opportunities for jobs and rewarding careers. Families across the north-east will be delighted at this news today and I share in their enthusiasm for what this means not just for them, but for the whole of the UK.

Nissan, as well as other major investors in the UK, have been watching the progress of the Brexit process with keen interest, and in particular, how will a hard Brexit affect their export sales from the UK, to the EU.

No UK trade agreement with the EU, post Brexit, would leave Nissan facing a 10% World Trade Organisation tariff. In any event, Nissan seem to have been reassured that the UK government is backing the UK automotive industry. What is not clear, is if any financial risks for Nissan are being underwritten.

Other players in the UK’s automotive sector will no doubt be queuing up to receive the same “reassurances”.