The £1000 trading allowance explained..
Association of Dog Boarders investigates…
In the DEFRA document ‘Guidance notes for conditions for providing home boarding for dogs’ November 2018 there is a caveat allowing people who earn less than £1000 per year in trading income to home board dogs without needing a licence. The details surrounding this statement are causing some debate within the home boarding community, so this guide is to help home boarders understand its context.
DEFRA say:
“The local authority inspectors should take into account all of the elements and weigh them against each other before reaching a decision as to whether an activity falls within the scope of the regulations.”
This means that your local authority makes the final decision regarding whether you need a licence or not. It is not up to you, and taking advice from those on social media could lead you down the wrong path. Regardless of your total earnings and income from any source, you should contact your local authority to be sure of their position regarding licence requirements in your local borough.
DEFRA say:
“The regulations specify two example business tests to be considered when determining whether an activity is considered as ‘commercial’ and thus within scope.”
The local authority will take the guidance into consideration when deciding if an individual home boarder needs a licence, but the ultimate determination is left to them. The information is ‘to be considered’ and is not statutory.
DEFRA say:
In scope
– Question: Does the operator conduct the activity in order to make a profit?
– Question: Does the operator earn any commission from the activity?
– Question: Does the operator earn a fee for the activity?
– Those who provide accommodation for other people’s dogs where the provision of the accommodation is entirely or partially the purpose of the business.
– Those who arrange the provision of accommodation services but do not provide the services themselves.
– Businesses providing accommodation for dogs in a domestic home environment.
Not in scope
– Businesses who provide services where boarding is consequential and not the actual purpose (such as a vet).
– Businesses offering boarding outside of a domestic home environment are out of scope for a home boarding licence but will need a commercial day care or kennels licence.
– Businesses who look after the dogs in the owner’s own home.
– The Government announced in Budget 2016 a new allowance of £1,000 for trading income from April 2017. Anyone falling under this threshold would not need to be considered in the context of determining whether they are a business.
These are considerations, they are not definitive. The decision regarding whether you require a home boarding licence or not falls with your local authority. The decision can be made by an inspector or a licence officer.
HMRC
The £1000 that is being referred to is your tax-free allowance for property or trading income, which begins each year on 1st April.
Trading income is separate to any income that you earn from being employed, receiving a pension or claiming benefits. It is an allowance that is available for people who are earning an income through self-employed status and through their hobbies (known as ‘casual earnings’). Everyone, whether self-employed or employed or receiving a pension or benefits has this allowance.
Self-employed people must add together all their annual earnings from any channel (including casual earnings) and remain under the £1000 threshold to utilize this allowance. There are also restrictions on using the trading income allowance if you own your own business or are connected to a company or partnership.
Those employed, receiving pensions or benefits (assuming that they are not also self-employed) must add together all their casual earnings and remain under the £1000 threshold to utilize this allowance.
Trading income is about INCOME, TURNOVER or EARNINGS. If you wish to deduct your expenses from your gross income, you cannot use the trading income allowance. If you wish to deduct your expenses or costs from your income, the trading allowance is not applicable and you must report your earnings to HMRC in the usual manner.
The £1000 referred to in the DEFRA guidance document is this allowance.
– If you are not eligible for this allowance, then you need a home boarding licence.
– If your self-employed total earnings exceed £1000 for any type of work, you need a home boarding licence.
– If your casual earnings through any channel exceed £1000, you need a home boarding licence.
– If you self-employed earnings plus your casual earnings exceed £1000, you need a home boarding licence.
EXAMPLES
Janet is retired. She earns £700 a year from home boarding and sells home made peg bags at the Sunday market, usually making around £400 a year. Her total trading income is £1100. Janet needs a home boarding licence unless her local authority tells her otherwise.
Susan works part time in a school and home boards during the school holidays. She earns £9,000 from her employer, and £950 a year from home boarding. Susan does not need a home boarding licence unless her local authority tells her otherwise.
Kathy is a self-employed dog walker that also boards 2 of her client’s dogs as they are not good in kennels. She earns £12000 a year from her dog walking business, but only £450 from boarding the dogs. Kathy’s total trading income is £12450 a year. As Kathy owns her own company, she is not entitled to the trading income allowance – so she needs a home boarding licence unless her local authority tells her otherwise.
David takes home boarding dogs through an online agency. The agency pays him when the owners book in, but he is classed as self-employed. David also does a bit of gardening in the local area (he doesn’t advertise), and he buys and sells coins on eBay as a hobby. All of David’s income from the home boarding, the coin collecting, and the gardening must be totalled together to class as his trading income. As his total earning before expenses is £1300, David needs a home boarding licence unless his local authority tells him otherwise.
SUMMARY
It is more likely than not that once you add up all of your self-employed earnings and your casual earnings, you will need a home boarding licence. The trading income allowance is not based on profit – it is based on total earnings from all types of casual earning and self-employed income.
And ultimately, right now it is up to your Local Authority. Do not take advice from others on social media or through online agency services, as if you trade without home boarding licence and your local authority deemed that you should have one, the fine cannot be waived due to what others have told you. It is your responsibility to check if you need a home boarding licence in your borough, and it is easy to check.
When you have carefully considered your earnings and are clear on what you earn, contact the licence department in your local authority and ask them to confirm that you have correctly assessed their requirements. MAKE SURE THAT YOU HAVE THEIR DECISION IN WRITING, as this will help if the personnel in the licence office change and the new staff have a different view on the requirements for home boarding licences.
For further information, contact us at the Association of Dog Boarders at: admin@associationofdogboarders.co.uk
Written in conjunction with Waggy Walks 4 Dogs Pet Business Support
References:
https://www.gov.uk/guidance/tax-free-allowances-on-property-and-trading-income
Home Boarding Guidance November 2018
https://www.litrg.org.uk/tax-guides/self-employment/what-trading-allowance
