Is this trading?

Hollysan

Hello all,

I have a client who, having gradually reduced her working hours, finally retired last year. However she still needs to fill in a tax return because she is a director and shareholder in a family business, although not active and not receiving a salary. The family firm had a bad year last year and so no dividends distributed.

However during the year she has started a new venture which involves producing one-off designs to clients' specifications. During the 2011 tax year she spent a few thousand pounds on expenses, mostly on materials and research, but received no income. It is little more than a hobby really, but she expects to receive some income from it, although the expenses may continue to produce a loss.

Does this constitude trading in the 2011 tax year? Or would it be better to include the expenses as set-up costs next year? I thought so, but she has had a website for over a year, so technically she has been actively marketing, although no income received. She will not have a tax liability either way.

I have looked at the guidance, but nothing quite definitive for this situation, so would welcome your opinions. Just can't make my mind up. Thanks for any thoughts...

Hollysan

Newbie

1. on a comercial basis. 2. with a view to the relisation of a profit. see below
http://www.hmrc.gov.uk/manuals/bimmanual/BIM75705.htm