> I would suggest hmrc make no distinction.
Actually they do I have the HMRC Business Economic Notes 14, (covers the pet breeding industry) which no longer are on-line.
"3. Breeding of pedigree livestock
The word `Pedigree' is used commonly to denote an animal of pure breeding, one that is registered with the appropriate breed society and inferring formal recognition that it has been bred from a line of registered animals.
Breeding arises from two principal and distinct motivations. Competitive or show breeding is concerned with establishing and/or developing and improving pedigree stock. Income from the sale of offspring or other associated activities is welcome but is neither the only or main motivation. On the other hand commercial pedigree breeding is simply a business venture and is concerned with pedigree only so far as it influences the marketability of offspring.
Pedigree breeders go to great lengths to preserve breed lines and generally improve or maintain standards of breed conformation. This attention to conformity at times necessitates the breeder to undertake what to some may be considered as distasteful or heartless. For example, docking of tails, culling of stock that do not meet breed standards.
As the demand for pets has increased, so too has the number of establishments involved in breeding, together with an increase in the activities of existing breeding establishments. Leaving aside the intensive breeding of birds, small animals and so on, it is the commercial exploitation of dogs and to a lesser extent cats, which causes most concern to the serious breeder and caring animal lover.
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Hobby or business
Most people involved with breeding, whether it be dogs, cats, pigeons and so on, take their activities seriously. This is not to say, however, that they also take the commercial side of breeding seriously or are motivated by a prime objective to make profits. As is often the case, the process of selective breeding can be a slow and costly exercise. The breeder will retain young that show promise. These will, in turn, depending on their eventual quality, be bred from, further enhancing the blood line and so the process will continue.
Inevitably, the creation of a blood line will result in a gradual increase in stock of animals and ensuing costs. Depending on the success of the breeder, demand should also increase, for use of stud animals or for young stock, thereby increasing the potential for profit.
It must be said, however, that this is not always a natural progression and even if success is eventually achieved, the time scale can be variable. A breeder may have to support a growing establishment, with no realistic prospect of enjoying an equally good inflow of receipts, for the foreseeable future.
The breeder may, of course, have been content to subsidise his/her interest and enthusiasm, but as costs increase, may be forced to consider one of two options.
To trim down stock of animals, selling off stock to other breeders or as pets
Increasing breeding activities in order to raise the required flow of receipts by selling young into the pet market.
Depending on individual circumstances, such additional breeding purely to increase income may become a permanent feature or be undertaken at different times, either to cover expenditure peaks, fund capital expenditure and so on.
Whether the activities amount to the carrying on of a trade profession or vocation so that the profits are assessable under Cases I or II of Schedule D or is merely a hobby, is a question that can only be determined on consideration of the relevant facts in individual cases.
........................................"
There are paragraphs on expenditure:
"Breeding economics
The principal factors which determine the possible income generated from any breeding unit are basically similar and can be summarised as follows.
Breeding capability of female
Average size of litter or batch of eggs
Length of gestation
Average maturity rate, which is age at which offspring become independent.
The young, of course, are not sold or ready to leave the breeder as soon as they are born. The breeder has the task of nurturing the young until they are mature. During this delicate period the breeder will incur
cost of feeding, and special dietary requirements
veterinary bills for examinations, treatments, vaccinations and so on
heating and bedding costs
cost of nursing and possible additional staff costs.
Once the litter or fledglings have reached maturity, the breeder may then also incur costs of any pedigree registration and advertising.
This expenditure will be in addition to the normal maintenance and feed expenditure incurred in the breeding establishment, which typically will include most of the following.
Operating expenditure and associated costs
Cost of new stock
Stud fees
Food costs
Heating costs
Maintenance to accommodation
Staff wages
Transportation costs - attending shows and so on.
Miscellaneous small equipment and consumables
Sterilising fluids/disinfectants
Bedding - ordinary and special bedding for welping
Printing stationery and advertising
Miscellaneous equipment such as bowls, brushes, towels, bins, collar, leads, and so on.
Fees and subscriptions
Breeding licence fees
Veterinary fees
Show/exhibition or other competition fees
Journals and other breed circulations
Registration fees - Clubs, Societies or Associations, for example, registration of puppy with the Kennel Club.
In considering the level of bona fide business expenditure relating to the establishment, a common problem revolves around the head count of productive animals. That is, animals which are actively used for breeding or showing, or are in any other way essential to and make an active contribution to the establishment.
A substantial number of breeders, especially in the dog world, become very attached to members of their stock and contrary to good business practise may continue to keep and maintain animals that have become non-productive. They, in essence, revert strictly to the status of `pet' rather than a business asset.
Ascertaining the true position appertaining to business stock or private pet, in the majority of cases will not be clear cut and where relevant will require careful consideration of the facts in each individual case."
Pretty much all GOOD breeders are not breeding as a business, so therefore it does not apply. Really nobody should ever buy a pup from somebody selling pups as a business as they don't do it for the right reasons.
I would suggest hmrc make no distinction. Technically any income should be declared for tax purpose offset from expenses. I don't think hmrc would be involved in contracts
I have never accepted a deposit. I do (did) have a sales contract however which is/was signed by both parties at point of sale - money changing hands and each clause explained fully. I had a litter with lots of interest BUT end of the day, although one of the prospective buyers had been and stated her preference for one of the two available males, as time went on after she'd been to visit, and she started making demands about the puppy, I started regretting saying she could have him and in fact told her I'd decided to keep him myself (which was true). She wasn't happy, to say the least, but no monies had changed hands and so at that point, the puppies still belonged to me. With it being my decision about what happened to them and where they went. I know I made the right decision for that puppy, at the time.
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