What is trading?

Trading is the exchange of goods or services for a fee. For tax, the law does not specifically define trading, but case law has built up to create a set of indicators or ‘badges’ of trade. The main points to look for are:

  • Repetition – where the trading is regular rather than a one-off event.
  • Profit motive – generally the profit motive should be present for trading to exist, even though a profit is not always actually made.
  • Mechanism for selling – the existence of a shop or catalogue or other means for the sale of the goods or services indicates the existence of a trade.
  • Acquisition of items for re-sale – buying goods with the intention of reselling them rather than consuming them will indicate a trade.
  • Similarity to existing trades – selling goods or services in the same or a similar way to existing traders.

HM Revenue & Customs (‘HMRC’) may decide that a trade is being undertaken even if only one of the above criteria is fulfilled.

Want to discuss further?

Helen Elliott

Partner

Ross Palmer

Senior Tax Manager

Gillian McKay

Senior Tax Manager

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