PTC - identifying a trade

carla030698

Hi,

I am taking PTC and BTC next week :crying: and am just about prepared for most of it but have come across something I havnt really prepared for!

If a person has a hobby of fixing cars for friends and family and only charges for parts to cover his costs, is this taxable?

I would say not, as he is not making a profit and he is not actively advertising the fact he is fixing cars.

Any thoughts????

Bookworm55

I would say that, on balance, he probably isn't self-employed and the car repairs are just a hobby. It does depend how much time he spends on it. Also, if he's just charging the cost of parts, he's probably making a trading loss anyway.

But since it is an exam question... I would talk about the Badgers of Trade which you can read a summary of on the HMRC website: http://www.hmrc.gov.uk/manuals/bimmanual/BIM20205.htm

Talk about as many as you can (both for and against) and make a judgement call. The closer you think it is, the less likely you'll be penalised for making the 'wrong' call.

The two most relevant here are
2/ Frequency of transactions- if he does it a lot, the car repairs could be seen as a trade
4/ Similarity to other trading activities- if he's also employed as a mechanic, these repairs would be more likely to be considered a trade. If he isn't, they aren't.

carla030698

Thanks, thats what I thought, and the link is a great help!