VBNB27000 - VAT Business and Non-Business activities: hobbies
People sometimes have hobbies that involve the making of taxable supplies, for example repairing cars or selling stamps. These supplies are not automatically made in the course or furtherance of business. You should apply the business test.
It is unlikely that hobbies which involve a registered person making minimal supplies are business. However, in some cases the person’s hobby can lead them to make substantial supplies and may grow to become a business activity. Many successful businesses grow out of a hobby or private interest.
When judging whether a hobby should be seen as a business activity you should consider whether the activity is taxable for income tax purposes. The Income Tax (Trading and Other Income) Act 2005, Part 2, Chapter 2, Section 5 states that:
Income tax is charged on the profits of a trade, profession or vocation.
This is a similar provision to the VAT definition of business in VAT Act 1994 Section 94(1) which includes “any trade, profession or vocation”.
VIT VAT Input Tax VIT44000 gives guidance on situations where people feel that tax paid on the costs of their hobbies may have been incurred to promote or advertise their business.