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HMRC internal manual

Business Income Manual

Stock: meaning of: trade includes hiring assets: factors to consider

When considering which of the three possibilities in BIM33040 best fits the facts in your case factors to take into account will include:

  • the length of time that the assets are held before being sold or disposed of,
  • the remaining useful life of the assets sold,
  • whether the assets are sold at a profit,
  • the proportion of assets sold,
  • is there a difference between the assets sold and those hired,
  • the frequency of sales and the organisation of sales,
  • whether there are separate customer groups,
  • the accounting treatment as stock or fixed assets.

Where the profitability of the whole business depends on the disposal of hire equipment or, in a situation where hire equipment is frequently lost or damaged, the scale of charges is set with this in mind, so that the compensation likely to be received produces sizeable profits, it is likely that the trade is the single one of turning the assets to profit, whether by hire or by sale. In a situation where equipment is hired for the majority of its useful life, with a low residual value and sold at a small profit or a loss then the trade is that of hiring and the assets are the fixed capital assets of the business.