Tax and Old Cars

Topics: Tax, Value added tax, Consumption tax Pages: 3 (912 words) Published: June 18, 2013
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Dear Ali,
It is a great pleasure to get the opportunity to contact with you. As you requested me to give you an advice, I would like to explain you some points that will help you while you do your activity. You mentioned that your hobby is restoring old cars. Buying them from auctions, repair them and then you sell them back to auctions with good profits. Your friend was right when he told you to register as self employed. Your hobby activity can be considered as a type of badges of trade called "the nature of asset". The cars are assets that can be turned to advantage by a sale. Also there is a badge of trade called "Frequency Transaction" which means profit from a onetime sale is normally considered as capital gain. However, if there is repeated buying and selling of Cars, this indicates the existence of trade activity dealing in investible cars. Another reason which is "profit seeking motive", you have the intention to re-sell the old cars to gain income. The cars which are your assets are likely held as investments so you trade them by buying and selling them. It is important to note that old cars you bought are soon sold afterwards. This called the "Length of Ownership". Even the way in which your assets (Old cars) sold acquired can be considered as a trade badge which means if cars are acquired deliberately; it may be a sign of trading. From the reasons above we can say that you are trading and running your own business reselling old cars after repairing them and you should register as self employed for tax purposes. For income tax purposes I will explain to you principles of VAT. VAT, Value Added Tax, is generally consumption tax. It is a type of a tax that is placed on the product from the stage of production to final sale. We can define VAT in your case as repairing old cars and add value to them to get good profit on selling them. For VAT purposes, a taxable person is any individual, partnership, company or whatever which...
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