HM Revenue + Local Compliance

Murdina

Dog breeding is taxable if it amounts to a trade. A trade has been the subject of much legal thought over the years and a Royal Commission many years ago suggested that the following are relevant - profit seeking motive, how you acquired the assets you sell, how you modified those assets if at all, how organised your sales are, whether you needed loan finance, number of transactions.

You also need to consider what expenses could be offset if you were trading in dog breeding - costs of initial breeding !!!!! for example, costs of feeding, vets' fees, KC registration, accommodation..........have you actually made a profit after any of this? I doubt it if my family's pedigree pet breeding experiences are anything to go by.

You could ring up and ask why they need this, and maybe suggest that a meeting might be a better way of resolving any queries. My gut feel would be the ebay stuff is maybe more likely as HMRC are known to have focussed on such sales in detail in recent years.

Murdina

Looks like one cannot refer to female dogs by their technical name!

greenflamingo_2

Thanks all. The Local Compliance Officer rang me yesterday and said he had "received a tip off" about the dog breeding but refused to name the source. How low can you stoop! Murdina agreed and most dog breeders would say the same.I compiled a spread sheet with all my expenditures on for the previous two litters - I am £4000 out of pocket - a bit of a shock but as I am not running a business and it is a hobby it has been subsidised out of my salary.

Two questions really that perhaps someone could help with:

1. Is there a time limit on how long the taxman can look back - I am wondering why 6 years has been written on the form?

2. I do not have receipts of every item I have spent on my dogs for the past 6 years (why would I?) - and you dont get receipts of stud dog owners anyway - how can I prove my expenditure with no paperwork - will the taxman just take my word for it or apply some type of costing formulae?

3. Would the taxman be able to approach the Kennel Club for details of litters registered under my name? Obviously when you register a litter not all of the pups will be live sales?

I am very very worried about all this

silvercar

1. Is there a time limit on how long the taxman can look back - I am wondering why 6 years has been written on the form?

Normally 6 years, though in the case of a suspicion of fraud they can look back further.

2. I do not have receipts of every item I have spent on my dogs for the past 6 years (why would I?)

Because you were trading. Ignorance is no defence.

and you dont get receipts of stud dog owners anyway - how can I prove my expenditure with no paperwork - will the taxman just take my word for it or apply some type of costing formulae?

Provide as much evidence as you can and then provide estimates for things without written proof.

3. Would the taxman be able to approach the Kennel Club for details of litters registered under my name? Obviously when you register a litter not all of the pups will be live sales?

Probably the Kennel Club would be obliged to pass info if asked, why not ask them?

I am very very worried about all this

It seems the only mistake you have made is not declaring the trade. By your calculations you have made a loss, so there is little to worry about.

greenflamingo_2

Thanks Jimmo
I have a good idea from whom the tipoff came. I am certainly not going to rat on anyone else. Their financial affairs are no concern of mine.

Can I entitled to ask for proof of where the taxman says I am a dog breeder - i.e. what paperwork he has so I can dispute it? I know I cannot ask for the name of the tip offer which is probably anonymous anyway.

fengirl_2

HMRC will not disclose their sources. The onus is on you to show that you have not made money from this venture.

greenflamingo_2

Would it be prudent to get an accountant acting for me - I am worried about filling in the form wrongly and perhaps omitting expenses that I should have claimed for?
It would be plain to see from my bank account / credit card that I am not making any profits.

System

You can certainly employ an accountant and they can advise on expenses you can set against your income however you will be expected to prove you incurred them.

If you have paid by cheque or credit card you may be able to reconstitute some accounts.

greenflamingo_2

Thanks Jimmo
I have searched the internet, fruitlessly, to try and find an accountant specialising in this type of area - obviously very uncommon. I think I will write a letter and not fill in the form and ask can the Local Compliance Officer visit my premises to discuss as I really have nothing to hide and it is blatantly obvious from my premises that it is a pet home and not commercial breeding. I can only hope that he will agree to this as he mentioned something about a meeting at his office but this would not physically show him my lack of facilities !

Murdina

I would engage an accountant. He or she can handle an enquiry like this far better than you could alone, not least as it should be tackled on 2 fronts namely the actual profits or losses and secondly whether or not you were carrying on a trade with a view to the realisation of profit. This is a technical and legal area not one for the amateur.

Good luck!