HMRC - Am I Trading or Not?

Uploaded by HMRCgovuk on 19.10.2012

Trading or Not?
This helpful guide will provide you with information to help you decide whether you are trading.
It gives some practical examples and tells you what to do next.
Here are some questions to ask yourself. If you decide that one or more applies to you,
then you are likely to be trading.
Do you wish to make a profit? If you sell because you intend to make a profit then you
are likely to be trading. You are unlikely to be trading if you are just trying to cover
your costs.
Repeated sales. If you sell items on a regular basis, or you sell a similar item on more
than one occasion over a period of a year, then you will be more than likely trading.
However, even a one-off transaction could involve a trade if you do it in a way a trader
Is what you are selling yours? If you bought something with the purpose of selling it then
this is likely to be classified as trading. If you had personal enjoyment from the item
then you are unlikely to be trading.
Do you already have a trade? If you are already selling something in a shop and you now sell
that product or something similar online you are more likely to be trading.
Have you changed the item? If you have made any changes to the item (including repairing
it) in order to sell it on at a profit then you are likely to be trading.
How did you sell the item? If the item was sold in an online shop then you are likely
to be trading.
How was the item bought? If you buy items with a loan or other borrowed finance and
it can only be repaid if the item is sold, then you are likely to be trading.
How quickly was the item sold? If you buy items and quickly sell them on with the intention
to make a profit this is likely to indicate that you are trading.
How was the item acquired? If you sell something that you inherited or were given as a gift,
it is unlikely that you are trading. However if its value exceeds £6,000 you may be liable
to Capital Gains Tax.
Let's meet Sally. Sally clears out her attic, and decides to sell her unwanted items online.
Sally had no intention of making a profit from selling the items, so she is unlikely
to be trading. As she's not trading there will be no need for her to register with HMRC.
Next we meet Gina. Gina works full time as a nurse and is also into her arts and crafts.
In her spare time she makes greetings cards for family and friends. People like her cards
and it has been suggested that she sells them online. At first she sells the cards at cost
price, but as business is brisk, and so that she can pay for her holiday, Gina starts to
add a little on to the price of the cards. Within a few weeks Gina is making a profit.
Gina is trading as she is now selling with the intention of making a profit, whereas
before she was merely making things for family and friends as a personal hobby. Gina should
keep a record of her expenses and purchases and register with HMRC.
Next David. David collects toy cars. He sometimes buys and sells them but he also looks for
swaps. The swaps are designed to complete a particular set of cars which David knows
will be more valuable as a set than as individuals. Once he has a complete set, he offers it for
sale or swap. David does not buy everything he sells but he is swapping things so he can
make a profit. Bartering like this is likely to be trading and David should register with
And finally Steve. Steve imports cameras and accessories on a regular basis from the Far
East and sells them online, making a profit. Steve is trading as he makes a profit and
sells regularly. He should keep his tax affairs up to date and register with HMRC.
For more helpful information about trading, what to do if you are trading and how to notify
HMRC, go to the link shown here.