4th September 2013 – The Day That Proving Trading Status Just Got Easier

A recent First Tier Tribunal ruled that “commerciality was not necessary to constitute a trade”.

Trading status is a big thing in tax.  It can get you to lots of nice reliefs and avoid you lots of nasty taxes.

In this particular case, the taxpayer was after industrial buildings allowances that are only available on buildings used in a trade.

The taxpayer claimed relief.  HMRC denied the claim as the company was not set up to make a profit and did not therefore qualify as a trading entity.

The company was in fact set up to recharge all of its costs and break even.

The Tribunal ruled that lack of profit did not rule out trading status.

Now, I would not recommend you all go out and set up businesses that only break even, but if you did have one such business, it has now become easier to get the same tax reliefs that all your profit making businesses can enjoy.