Over the years I have noticed that more and more individuals would like to run a business in their spare time rather than risk giving up their day job. This I understand. Due to economic reasons, it might be in the interest of those individuals to ensure that they conduct thorough research, calculate all costs and weigh up the consequences.
It might be easier to explain the differences between a hobby and a business first.
A hobby, as outlined in the English Oxford Living Dictionary – “An activity done regularly in one’s leisure time for pleasure”. A business is outlined as “A person’s regular occupation, profession, or trade”.
Amazon.com, commonly known as Amazon was founded on 5th July 1994 and EBay (Electronic Bay) formally known as Auction Web was launched on 1st September 1995. Since their introduction in the 1990’s both these companies have changed the way business is done. We now have a strong online arena where businesses along with innovative ways of doing business have increased considerably. This has not gone unnoticed.
HMRC’s definition states that you are ‘likely to be trading’ if you:
- Sell regularly to make a profit;
- Make items to sell for profit;
- Sell on-line, at a car boot sales or through classified adverts on a regular basis;
- Earn commission from selling goods for other people;
- Are paid for a service you provide.
You’re probably not trading if you sell some unwanted items occasionally or you don’t plan to make a profit. You can’t use any losses you make as part of a hobby to reduce your tax bill.
Be aware that HMRC have been asking for more powers to track on-line businesses. Be honest with your business dealings. If you are running a business, why not declare it and build a sustainable future?
From rock to rock gardens, enthusiast turns hobby into the UK's best small business