At what point does a seller become a dealer?

marmalade76

marmalade76

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How many horses dose someone have to sell before they become a dealer? Do they have to make a profit (either by selling the horse for more than they paid, or by making a profit after all costs have been taken off).

Thoughts?
 
HMRC will decide based on what are known as 'badges of trade':


1. Profit-seeking motive

An intention to make a profit supports trading

2. The number of transactions involved

Systematic and repeated transactions support trade

3. The nature of the goods sold

Are the goods only capable of being turned to advantage by being sold? Or do they yield income, or give enjoyment through pride of ownership?

4. Existence of similar trading transactions

Was this a one-off transaction or part of a pattern that suggests trading?

5. Changes to the goods

Were the goods repaired, modified or improved to sell them more easily?

6. The way the sale was carried out

Were the goods sold in a way that indicates trading, or to raise cash in an emergency?

7. The source of finance

Was money borrowed to buy the goods? Were any profits to be used to repay the loan?

8. Interval of time between purchase and sale

Goods being traded are usually bought then sold quickly

9. Method of acquisition of the goods

Goods acquired by an inheritance, or as a gift, are less likely to be the subject of trade
 
I can't remember precisely but from what I've read its very low, like, single figures low.

Or on the other hand you can just be starting out and have sold NO horses but if you call yourself a dealer you're a dealer.
 
pennyturner said:
HMRC will decide based on what are known as 'badges of trade':


1. Profit-seeking motive

An intention to make a profit supports trading

2. The number of transactions involved

Systematic and repeated transactions support trade

3. The nature of the goods sold

Are the goods only capable of being turned to advantage by being sold? Or do they yield income, or give enjoyment through pride of ownership?

4. Existence of similar trading transactions

Was this a one-off transaction or part of a pattern that suggests trading?

5. Changes to the goods

Were the goods repaired, modified or improved to sell them more easily?

6. The way the sale was carried out

Were the goods sold in a way that indicates trading, or to raise cash in an emergency?

7. The source of finance

Was money borrowed to buy the goods? Were any profits to be used to repay the loan?

8. Interval of time between purchase and sale

Goods being traded are usually bought then sold quickly

9. Method of acquisition of the goods

Goods acquired by an inheritance, or as a gift, are less likely to be the subject of trade
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Nine, possibly ten horses/ponies in under 12 months.
All horses acquired cheaply or free.
Horses/ponies sold on within months and sometimes weeks.
Improvements made on condition in some cases but no improvements in the form of schooling/bringing on.
Thought to be sold through free ads/Preloved and in response to wanted ads (not openly, though).
More cheap/free horses/ponies currently sought, mainly through Facebook but via PM only, no enquiries made openly.
New and used equestrian items have also been advertised, rugs, travel boots, etc.
As neither person involved has a job, but do have several children, it is assumed that horses are being purchased/kept on benefit money.
 
I think the HMRC definition is to do with taxing profits and when "profits" become "earnings".

I think the more simple definition of 3 or more is to do with sale of goods act, as in buying from a "dealer" gives the purchaser more rights.
 
I have always understood it to be three. This thread is the first thread that I have ever read that suggests the conditions may be otherwise
 
The three thing is not set in law anywhere it's a bench mark to look at .
For instance a dressage trainer selling two horses a year could be seen to be a business.
But a private owner selling ten as they where giving up would not .
 
How about, for example, after the racing season is over next year I decide to sell three of mine into riding homes because their racing careers are over?

I sold one this year but it is more than feasible that, with five in training next year (four of whom have already raced and are near their peak) that we could be retiring a few and hopefully finding homes where they can go on to try something new. I wouldn't have thought of myself as a dealer in that situation...?
 
Horses being purchased and kept with benefit money is irrelevant. That is the persons income to spend as they wish. But if they are dealing horses and not declaring the fact and any related profits to DWP and HMRC, they may be committing benefit/tax fraud.
 
Goldenstar said:
The three thing is not set in law anywhere it's a bench mark to look at .
For instance a dressage trainer selling two horses a year could be seen to be a business.
But a private owner selling ten as they where giving up would not .
Click to expand...

Yep, had thought of that myself, but in this case more animals are being continually sought, colts this time, dread to think what she intends to do with them..
 
Crosshill Pacers said:
How about, for example, after the racing season is over next year I decide to sell three of mine into riding homes because their racing careers are over?

I sold one this year but it is more than feasible that, with five in training next year (four of whom have already raced and are near their peak) that we could be retiring a few and hopefully finding homes where they can go on to try something new. I wouldn't have thought of myself as a dealer in that situation...?
Click to expand...

I wouldn't either although if you are a trainer I suppose it could be seen as a business transaction

If you are just a private owner retiring them and selling on then no I wouldn't think dealer
 
I don't think the retired racehorses being sold on would be dealing.

I think it was three as well, and what do you mean by dealer - buying, breeding or acquiring horses to school and sell on would be my definition.
 
webble said:
I wouldn't either although if you are a trainer I suppose it could be seen as a business transaction

If you are just a private owner retiring them and selling on then no I wouldn't think dealer
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We only train our own, no outsiders (although maybe one potentially next summer). Very few of them are sold back into racing; some may go on as Broodmares but the majority from now on will be backed and sold as riders.

I had toyed with the idea of buying horses in training at public auction, backing them and selling them on as riders but wondered whether this would then be classed as dealing?
 
Crosshill Pacers said:
We only train our own, no outsiders (although maybe one potentially next summer). Very few of them are sold back into racing; some may go on as Broodmares but the majority from now on will be backed and sold as riders.

I had toyed with the idea of buying horses in training at public auction, backing them and selling them on as riders but wondered whether this would then be classed as dealing?
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It would in my mind yes, I think thats slightly different
 
From an HMRC point of view the only difference between whether you are a dealer or a private individual making a profit would be whether it is treated as profit from a trade or a capital gains profit. Either way if you are making money on an investment then you are potentially liable to be taxed on the profit.

The dealing aspect with regard to cover by Sale of Goods is more around the 3 level.
 
Crosshill Pacers said:
How about, for example, after the racing season is over next year I decide to sell three of mine into riding homes because their racing careers are over?

I sold one this year but it is more than feasible that, with five in training next year (four of whom have already raced and are near their peak) that we could be retiring a few and hopefully finding homes where they can go on to try something new. I wouldn't have thought of myself as a dealer in that situation...?
Click to expand...

I would assume that that would be classed as trading, essentially you are making a business decision by selling those horses.
 
Lizzie66 said:
From an HMRC point of view the only difference between whether you are a dealer or a private individual making a profit would be whether it is treated as profit from a trade or a capital gains profit. Either way if you are making money on an investment then you are potentially liable to be taxed on the profit.

The dealing aspect with regard to cover by Sale of Goods is more around the 3 level.
Click to expand...

Is a horse not a wasting chattel, and therefore not subject to capital gains tax?
 
Horses are not suject to capital gains tax.

As for making a profit - how? If you costed all your time that was put into the horses then I guess it is nearly impossible to "make a profit." For ordinary horses at least.

We often hear of a wonder horse that was successful and then sold and the rider will say "it bought my house" but if it is only one then that isn't dealing.
 
Marmalade if it's about a specific person and you're trying to figure out if they're commiting tax/benefit fraud you'd be better just giving HMRC/trading standards a call and asking what their opinion is. But it's very dificult to make a profit on any horse, let alone the cheap ones that are going left right and centre at the moment!
 
Orangehorse said:
Horses are not suject to capital gains tax.

As for making a profit - how? If you costed all your time that was put into the horses then I guess it is nearly impossible to "make a profit." For ordinary horses at least.

We often hear of a wonder horse that was successful and then sold and the rider will say "it bought my house" but if it is only one then that isn't dealing.
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From a tax perspective you can't cost in your time. A profit is calculated as the amount you paid for the horse less what you have spent on it in cash. If you pay somebody to school it or pay yard staff you can deduct that, but if you do it yourself that hasn't cost you anything so you can't deduct it.

As somebody has previously said, if you buy something with a view to selling it for profit then any profit is subject to income tax as a trade. If you buy a horse to ride, decide it isn't the right horse for you and sell it that isn't trading from a tax perspective and any gain is also exempt from capital gains tax.
 
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Cowpony said:
From a tax perspective you can't cost in your time. A profit is calculated as the amount you paid for the horse less what you have spent on it in cash. If you pay somebody to school it or pay yard staff you can deduct that, but if you do it yourself that hasn't cost you anything so you can't deduct it.

As somebody has previously said, if you buy something with a view to selling it for profit then any profit is subject to income tax as a trade. If you buy a horse to ride, decide it isn't the right horse for you and sell it that isn't trading from a tax perspective and any gain is also exempt from capital gains tax.
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Oh right, I see. There have been a few legal cases deciding if someone is a dealer or not, as if you buy from a dealer you have more protection than from a private person. I think it comes down to one of those "a man on the Clapham omnibus"
cases.
 
Orangehorse said:
Oh right, I see. There have been a few legal cases deciding if someone is a dealer or not, as if you buy from a dealer you have more protection than from a private person. I think it comes down to one of those "a man on the Clapham omnibus"
cases.
Click to expand...

There's probably a difference between the definition of trading for tax purposes and the definition for consumer protection purposes. I only know about tax, so can't comment on the legal bit.
 
budley95 said:
Marmalade if it's about a specific person and you're trying to figure out if they're commiting tax/benefit fraud you'd be better just giving HMRC/trading standards a call and asking what their opinion is. But it's very dificult to make a profit on any horse, let alone the cheap ones that are going left right and centre at the moment!
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I am. People have a real problem with people keeping several horses (at least 10 that I know of ATM) whilst living entirely on benefits. More horses are being sought and acquired all the time (though people are advising sellers/givers not to sell/give to said people as in at least one case the horse was promised a forever home and was sold on within two months, despite the givers saying the horse was to be returned if it was no longer wanted) , with the intention of selling on. Whilst I would be surprised that there is any profit at all (as these animals are at a livery yard), the HMRC and DWP might not agree. The situation is getting a bit like Ted's mum.
 
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