I have bought and sold a few cars during the last two years. I do know that the Inland Revenue does not come after you if you make any profits on cars that are for personal use. I always register the car in my name or my wife?s name and sell on after a few months. I have made money on some cars and lost on others. All in all, I have just about broken even after two years of motoring ? right through this period my wife had a car for her use and I had one - not too bad in my book. Plus I got to use a variety of motors.
I would like to increase the ?frequency? of turnaround, now that I seem to have more or less taught myself what can be bought and sold off easily. However what I was wondering is that, is there a limit in the number of cars that one can register in their names? A figure of 5 cars per year seem be the ?norm? according to people in the trade. I have carried out a through search on the Inland Revenue web site, and I CANNOT find a limit on the number of cars that one could register in their name per year.
Can anyone shed some light? Aprilia, if you don?t mind me asking, you do buy and sell cars, don?t you? Do you do this as a trader or a private seller?
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Can anyone shed some light? Aprilia, if you don?t mind me asking, you do buy and sell cars, don?t you? Do you do this as a trader or a private seller?
Yes, I buy and sell a few, mainly Mercs, the odd BMW and occasionally a Jap import sportscar. I do this with trade status. IIRC the IR limit for 'private' sellers is half a dozen a year. In any case, I suspect if you go beyond this your insurance company might become concerned.
I tend to go some way over the 6 cars a limit and operate as a ltd. company (I do other work as an automotive engineering consultant and the income from that is much more than from trading a few cars - which I do more or less as a paying hobby). Best to square things with the IR and also get trade insurance (I use Norton Insurance in B'ham).
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Best to square things with the IR and also get trade insurance (I use Norton Insurance in B'ham).
i agree with aprilia as someone always gets jealous of you in the end and reports you,you will then end up justifying that you were not trading cars to the inland revenue,and as said motor trades policies are from £200 and allow you to drive most things with wheels legally.
Its very difficult in todays world to keep swapping policies with insurers and the time may come that you need to make a claim and they will say you were running a business and they wont pay.
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\"a little man in a big world/\"
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There is no limit, either formal or informal.
The real issue is one of whether or not you are carrying on a commercial venture. Simply buying and selling to minimise your depreciation losses is not trading. I've seen someone pay tax on the profits from one vehicle a year.
However if you are othewise involved in the motor trade as say a mechanic or a car salesman employed by a garage it will be much harder to argue that you are not trading.
The problem with going out and getting trade insurance is that this is a strong indicator of a commercial venture.
Personally I would be more concerned about VAT than income tax. In order to be able to use the various schemes you actually need to be registered, so if you don't register you could easily be 'stuffed'. The turnover limit is £60,000 now, if your buying and selling at £2k this shouldn't be a problem, but if they are £15k a go you could easily have problems.
Also bear in mind that it is now a serious criminal offence to accept cash exceeding in value 15,000 euros in one trading transaction without being registered as a 'High Value Dealer' with HMRC, this is separate to any VAT or income tax liabilities.
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I think that it is also the case that you cannot accept more than £5000 in cash without reporting the purchaser to some government body to do with money laundering.
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As a private individual you can accept as much cash as you like. Dont try paying it in anywhere tho.
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TourVanMan TM < Ex RF >
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There is no limit, either formal or informal.
Oh, I bet there is! If you were trading, say, 50 cars a year I doubt whether any of the authorities would accept you were doing this as a private individual.
>>The problem with going out and getting trade insurance is that this is a strong indicator of a commercial venture.
Yes, it is a bit, isn't it...
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Whoops sorry, obviously upset you some how ;-)
The OP was under the impression that there was a number below which he was treated as not trading, I was simply trying to point out that that wasn't the case.
He was also advised that he should get trade insurance. However I thought that he was trying to avoid being labelled as a trader, when on the information provided he probably isn't so I don't see how obtaining trade insurance would do anything to help him.
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Many thanks for the contributions so far. Plenty for me to think about. I suppose the best thing is to first ask the Inland Revenue as to whether what I am planning to do make me a trader.
Hxj, you are correct, I do not want to be labelled as a trader.
Aprilia, thanks for the trade insurance referral. Just did a very rough quote, not as expensive as I thought.
One question I have is - suppose, I get a trade insurance, it still means that all cars must have road tax?
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Whoops sorry, obviously upset you some how ;-)
LOL! Not upset at all... Just being cryptic. I have a very thick skin, believe me!
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The Inland Robbers (now more properly known as HM Revenue and Customs) have a list of what they call 'badges of trade' which are the criteria by which they judge whether someone is actually trading or not.
As someone has already said, best be honest with the Revenue - car selling is just ths sort of thing that a nosy, or objectionable, neighbour might think it fun to 'inform' about.
I suspect they're reluctant to specify a strict limit: you could buy and do up 4 classic cars in a year and make quite a lot of money, and that would be more of a 'trade' than simply changing you and your wife's cars every month.
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If you want trade insurance, you need to be a trader, not a private individual that wants (possibly)cheaper insurance for multiple cars.
So you can either be a trader with a motor trade policy and tell HMRC, or a private motorist who swaps and changes cars regularly, with a private motor policy.
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If, as you say, it is just a hobby then for the time being probably your best bet is just to keep very good records. If you are just breaking even then if the Revenue do come a knocking and you can prove you are not making any money then you will not have any tax liability.
Keep every invoice, receipt and keep it in all good order just as you would for a business.
The VAT issue is perhaps a little more difficult. If you are making no money it would be difficult for them to argue you are a commercial enterprise. If you are making money then you should think about VAT registration. In most cases this would mean you paying a portion of "Margin VAT" on the profit on each car. Again, if you're not making a profit there is nothing to pay.
If you go the whole hog, you'll need proper trade insurance (impossible really without it), proper auction accounts (if using auctions), possibly trade plates etc. You will need to keep proper accounts, get VAT registered, open a specific business bank account etc. You will need to declare yourself as trade in adverts. Basically, become a bona fide business even if part time. Don't find yourself moving from hobby to business and then doing nothing about it as the longer it goes on the more problems you'll have if you get found out.
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>>I would like to increase the ?frequency? of turnaround, now that I seem to have more or less taught myself what can be bought and sold off easily.
The badges of trade to which Avant refers are a long and exhaustive guide. Read the links from www.hmrc.gov.uk/manuals/bimmanual/BIM20200.htm You suggest that you are buying and selling a number of cars with a view to a profit... which almost certainly makes you a trader.
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