An example may illustrate the answer to this question.

Harry updates his iPad and decides to sell his old one – he does not use the iPad for his employment or any business, it’s used purely for recreational purposes. He sets up an account on eBay and manages to sell for a reasonable price. Encouraged, he sells a number of other, no longer used, personal items on the same eBay account.

At this point, it would be difficult for the tax office to argue that Harry was engaged in a trade.

Harry then has an opportunity to buy an iPad from a friend, and the price his friend wants is reasonable, so reasonable that Harry is tempted to purchase and resell on eBay for a quick profit. This he does. With a small profit in the bank Harry starts to consider that he may be onto a good thing and plans to buy and sell more items online.

Buying with an anticipation of selling in order to make a profit is a so-called “badge of trade”, and if Harry continued with this activity he may need to register his online trade with HMRC and submit a tax return.

The criteria that HMRC will apply to decide if a hobby (sometime described as an adventure in the nature of a trade) is a trade are listed below. These are the badges of trade that will be considered by HMRC together with any relevant case law:

• 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.

We are waiting to see if a new Trading Allowance of £1,000 will be reintroduced after the election this month, if it is, Harry would not pay tax as long as the income from his eBay account did not exceed £1,000.

We would be happy to discuss this issue with any readers who are unsure of their present status. You should be aware that there may be penalties if you do not register a business activity with HMRC, file a tax return and pay any tax due.

Following on from the previous article, we thought readers might be interested in the consequences if they fail to pay their Self Assessment tax on time.

If you are facing cash-flow issues, and cannot see how you can afford to settle part, or all of your tax payment due 31 July 2017, what is the best strategy to avoid confrontation with HMRC and minimise any penalties and interest charges?

Firstly, let’s take a look at penalties. The trigger dates for penalties are 30 days, 6 months and 12 months after the tax became due for payment. On each of these trigger dates you will be charged a 5% penalty based on the amount of tax outstanding.

The current interest charge on unpaid tax is 2.75%.

If you are concerned that you may not be able to meet your liabilities as they fall due, and in particular, any payment due 31 July 2017, we recommend a two-pronged approach.

• Firstly, make a realistic estimate of when you can settle amounts due. This may be instalments or payment in full at a time after the due date.
• Secondly, call HMRC’s Business Payment Support Service on 0300 200 3835, and agree an extended payment scheme with them. Generally speaking, they will agree as long as your suggested scheme clears any outstanding liability before your next liabilities become due for payment. They will also exhort you to gather funds such that you can settle future tax on the due dates.

What is inadvisable, is to bury your head in the sand and wait for the brown envelopes, telephone calls and debt collectors at your front door. Call the help line before the tax falls due and keep to your agreed settlement plan.

Are you self-employed? If you are, you may need to make your second payment on account for 2016-17, due date for payment is 31 July 2017.

This second payment on account will have been based on 50% of your combined Self Assessment tax and Class 4 NIC liability for 2015-16. Which raises an interesting question.

What if your actual Self Assessment liability for 2016-17 is higher or lower than the liability for 2015-16? From a cash flow perspective, the outcome is win-win in both cases. Let’s consider the two options in more detail:

2016-17 liability is higher than 2015-16

In this case your taxable profits will have increased, year on year, and after your January and July 2017 payments on account have been deducted, there will be a balance owing to HMRC. At present there is no legal requirement to add this underpayment to your July 2017 payment, in fact HMRC will not ask for any balance owed until 31 January 2018.

2016-17 liability is lower than 2015-16

In this case your taxable profits will have reduced, year on year, and if you make your January and July 2017 payments on account (based on the 2015-16 results) you will have overpaid HMRC. Again, there is no legal requirement to change your July 2017 payment, and HMRC would no doubt be happy to make use of your overpayment until they would be required to offer a possible refund on 31 January 2018.

However, if you find yourself in this position, you can make a formal application to reduce your 31 July 2017 payment.

Our advice, if you have a realistic expectation that your accounts on which your 2016-17 liability will be based (usually the accounts ending in the tax year to 5 April 2017) are lower than the previous year, then we should calculate the effect on your Self Assessment liabilities for 2016-17 and lodge a formal request to reduce your July 2017 payment on account, if appropriate.

Apparently, over 4 million tax payers are eligible to claim the new marriage allowance, but only 2 million have done so. If our math is correct, this add up to £1.3bn in unclaimed tax refunds.

The allowance has been available since 6 April 2015 and is worth £212 for 2015-16, £220 for 2016-17 and £230 for 2017-18; a cumulative tax rebate of £662. The allowance is only available to the following couples:

• Couples must be married or in a formal civil partnership, living together does not qualify.
• One spouse/partner needs to be a non-tax payer. i.e. their income must be below the personal tax allowance. (£10,600 for 2015-16, £11,000 for 2016-17, and £11,500 for 2017-18).
• The other spouse/partner needs to be a basic rate (20%) taxpayer. Higher rate taxpayers cannot receive any benefit from the Marriage Allowance.

The spouse/partner that has the spare personal allowance needs to make the claim, and once made, the relief should automatically be given in subsequent years. You will need to advise HMRC if your circumstances change.

The allowance is simple to claim, just visit the Gov.uk website at https://www.gov.uk/apply-marriage-allownce. And don’t forget, it is the spouse partner who pays no tax (with an unused, or partially unused, personal allowance) that needs to make the claim.

Before making the application you will need to have you and your partner’s National Insurance numbers. You will also need a way to prove your identity. This can be one of the following:

You’ll get an email from HMRC confirming your application.