# Hobby breeding - TAX



## flosskins

Hi,

my brother has got me all concerned regarding tax over the sale of kittens, he says that any income needs to be declared to the taxman, even if you don't make a profit you have to keep a record of everything as you are selling and getting an income. what do you all do? i know profit and 'hobby breeding' can be a touchy subject i just wondered who out there was declaring their income/losses etc?


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## lizward

I shouldn't worry too much, it won't be difficult at all to show you are making a huge loss, in fact some self-employed people who also breed cats keep records and declare the loss as it can be taken off their profit from their other business.

Liz


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## havoc

There is no way a breeder can make money from kittens bred in a family situation, you'd have to run a huge kennel type set up. I do keep ALL receipts - I just throw them into a box in case I ever need them. It helps that I tend to order food online in bulk and buy cat litter in huge amounts a few times a year so it's easy for me to keep track. I always get the full A4 receipt printout from the vet too. Those alone are more than my gross 'income' from kitten sales but if necessary we could also go into energy costs, depreciation on carpets, washing machine, vacuum cleaner etc. I'd probably even be able to offset the cost of coffee supplied during kitten visits 

I believe an over enthusiastic tax man tried to target cat breeders some years ago ................. and gave up because they'd be paying us.


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## Lumboo

Yes, any income needs to be declared on a Self Assessment form. You need to register with HMRC for this so they can send you an on-line username and password (easier than a paper version). 

Keep all your expenses receipts; food, vets fees, advertising costs etc. so they are offset against your income.

As most breeders on this site seem to be making a loss, this will be shown on your tax return. Any loss can be carried forward to the next tax year.

Please note that even if you are making a loss, you STILL need to declare any income to HMRC.


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## havoc

> Please note that even if you are making a loss, you STILL need to declare any income to HMRC.


Have the HMRC guidelines on breeders changed then?


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## Paddypaws

I don't know what the official HMRC line is on hobby breeders, but do agree with Spid that it is a good idea to keep a folder of ongoing expenses. Believe me, if the Tax man ever DOES come knocking it is far better to have the paper work in place rather than try to remember back a year or two and construct accounts. The tax man wants clearly receipted expenses, vague debits from a bank account just don't cut the mustard!


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## havoc

Whereas we do keep receipts this is something which was thoroughly investigated by the tax man some years ago. A true hobby breeder is breeding for themselves and the sale of kittens which are not required for the breeding programme is incidental to the main aim of breeding. We do not produce kittens to sell. If we did we would be a business and subject to the full terms of SoGA. When we sell kittens not needed for breeding it's no different to someone selling their unwanted clothes on ebay - I know that sounds awful.

The term 'incidental' is used quite a bit. Is the breeding 'incidental' to the keeping of the animals as pets as part of your hobby. If it is then you're not a business and if you're not a business then you cannot carry losses forward etc. Lots of things come together to show whether an individual is truly an enthusiast rather than a kitten farmer. Being an active member of a club is one, being able to show a breeding programme, ie that you have a plan and are working towards an aim is another.

Non breeders and kitten buyers probably think breeders breed kittens to sell. We don't and in the baldest possible sense those kittens which are sold as pets are effectively second hand goods. I know this sounds dreadful but there is a difference between how officialdom see our beloved cats and how we do.

Admittedly, anyone who breeds purely to sell kittens and has no other obvious interest in their breed should be very cautious but that certainly doesn't apply to any breeders I know.


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## Lumboo

havoc said:


> Have the HMRC guidelines on breeders changed then?


If you are a "Hobby Breeder" then you may not need to file a Self Assessment. However, the definition of "Hobby Breeder" is NOT clear cut, and there are no 'official HMRC' guidelines stating this definition.

Therefore anyone taking money/income for a litter should contact HMRC to ask for advice on their individual case, as the technician will go through all your personal details and give you advice pertaining to your situation.

As an Accountant my advice would be to check your own personal tax situation, and not rely on the outcome of other people situations or the outcome of cases on the internet. You should contact the revenue yourself and go through all your details with them, and ensure you get a reference number for your call. Then, should anything be queried in years to come you have a reference number that logs your question to them, so you will not be penalised.

Remember, the 6 year rule does not apply if HMRC thinks there has been a non-payment of tax.


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## havoc

> However, the definition of "Hobby Breeder" is NOT clear cut


lacks commerciality 
does not set out to make a profit
occasional sales are a by-product of the hobby

not my words.


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## Lumboo

havoc said:


> lacks commerciality
> does not set out to make a profit
> occasional sales are a by-product of the hobby
> 
> not my words.


Yes, but unless there is an HMRC definition of 'hobby breeder' on a Notice, they will still not apply the above definition to everyone.

Just my advice to the OP - everyone can chose to do things whichever way they want.

For the sake of a phonecall and keeping a few receipts I wouldn't take the risk, but as a professional I have to advise people to do things the safe way. I have seen too many tears when things haven't been done the right way to ever advise otherwise


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## havoc

> unless there is an HMRC definition of 'hobby breeder' on a Notice


It doesn't need to be specific to a breeder. Doesn't matter if it's kittens or cross stitch Christmas cards, or the occasional flower arrangement. It's whether someone is trading or a hobbyist in whatever they do. The definitions apply to all.


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## Lumboo

havoc said:


> It doesn't need to be specific to a breeder. Doesn't matter if it's kittens or cross stitch Christmas cards, or the occasional flower arrangement. It's whether someone is trading or a hobbyist in whatever they do. The definitions apply to all.


My advice remains the same;

Keep all expenditure receipts & documention of income
Contact HMRC to get advice/clarify *your own *circumstances, and not info off a general forum when it comes to your own tax liability


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## Alaskacat

The above is, of course, excellant advise as all circumstances are different. I can see no way anyone could make a profit breeding in a normal family home though, I understood that the Tax Office are not interested in cat breeders as they understand that. 

I am self employed and would love to offset the breeding costs against my business, however, I really don't think it would be long before HMRC were knocking at my door and I was being asked to prove I was trading, not just using the cost of keeping my pets to avoid paying tax. It's something to bear in mind though :


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## havoc

> I understood that the Tax Office are not interested in cat breeders as they understand that


As far as I'm aware you are correct in that nothing has changed since this was last looked into some years ago. Of course it is also correct that an open forum is not the place for guaranteed advice and I would therefore suggest anyone who is worried starts with the GCCF. They do know the results of previous investigations and their professional experts do have specialist knowledge of tax *and* hobby breeding.


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## raggs

I cant see any reputable breeder making much of profit anyway, sure if your the type of person that mates two cats and doesnt bother or cant register them, sells them at 7-8 weeks of age no jabs, vets checks insurance or any type of follow up then there prob will be some profit for these people ( i refuse to call this type of person a breeder ) simply because they have no outlay apart from feeding their kittens......Personally, i would love to see all breeders registered with a governing body and licenced. and checks done on advertised cats/kittens and prosecute all the unlicenced ones..rant over........Chris


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