Most people would argue that as long as profits are under under £1000 then anyone can sell puppies and this seems to be a common misunderstanding for both Licensed and Unlicensed breeders. The Animal Welfare (Licensing of Activities Involving Animals) (England) Regulations 2018 does not explicitly mention a £1,000 threshold related to dog breeding. Instead, it outlines that a breeding licence is required for anyone who breeds three or more litters in a 12-month period and sells at least one puppy, or if they are deemed to be breeding dogs and selling them as part of a business, regardless of the number of litters.
The £1000 figure is related to the trading income threshold for tax purposes, not specifically for breeding licences. If your income from breeding dogs exceeds £1000, you must declare it to HMRC. However, this amount is used as an indicator rather than a strict limit for requiring a breeding licence. The primary factor for licensing is whether the breeders activity is conducted with the intention of making a profit and this is where unlicensed breeders should understand the Badges Of Trade
What breeders should really understand is the badges of trade.
The “badges of trade” are a set of principles used by HM Revenue and Customs (HMRC) in the UK to determine whether an activity is considered a trade and, consequently, whether income from that activity should be subject to taxation as business income. It also, helps define whether a breeder should be licensed as the rules dicate
These badges help assess whether dog breeding activities constitute a commercial breeding business.
Like most of the breeding regulations, these can be interpreted in many ways. Here’s an overview of the badges of trade and their relevance to defining a commercial breeding business:
Profit Seeking Motive:
If the primary intention behind breeding dogs is to make a profit, the following examples may indicate trading activity. The evidence may include business plans, financial forecasts, and marketing strategies focused on profit generation.
Transactions in your bank account
Frequent and systematic breeding and selling of puppies can suggest trading rather than hobby breeding. Evidence: Records showing multiple litters bred and sold within a specific period.
Assets (Dogs)
Assets acquired with the intention to resell are likely to be considered trading stock. This can be evidenced as purchasing breeding dogs specifically to produce and sell puppies and investments in stud dogs.
Changes to Assets
Modifying assets to make them more marketable, such as investing in veterinary care and pedigree registration, could indicate trading. The evidence could be deemed as enhancements to the dogs’ value (e.g., health certifications, training).
Similar Transactions
Engaging in similar trading activities or having a history of trading in similar goods/services supports a trade classification. This can be evidenced by past involvement in dog breeding and sales, or related business activities.
The Way the Sale Was Carried Out:
Conducting sales in a manner typical of businesses, such as advertising and setting up a formal sale process, suggests a trade. This can be evidenced by the use and registration on online platforms, professional websites, and formal sales contracts.
The Source of Finance:
Financing methods, like loans or investments aimed at breeding and selling dogs, indicate trading intentions. This can be evidenced by financial records showing business loans or investments that may have a paper trail relating to used breeding operations.
Interval of Time Between Purchase and Sale:
A short interval between acquiring breeding dogs and selling puppies could indicate trading.
Defining a Dog Breeding Businesses
Breeding and selling three or more litters in a 12-month period automatically suggests commercial intent under the Animal Welfare (Licensing of Activities Involving Animals) (England) Regulations 2018. Regular advertisements and professional marketing of puppies are strong indicators of trading.
A systematic approach to breeding, including maintaining detailed records, health checks, and customer contracts, aligns with business operations.
Impact on Licensing
If a dog breeding activity is deemed a commercial business based on these badges of trade, the breeder is required to:
- Obtain a Breeding License: Must apply for and maintain a breeding license from the local authority.
- Compliance: Adhere to regulatory standards for animal welfare, record-keeping, and facility maintenance.
- Taxation: Declare income from dog breeding activities to HMRC and comply with relevant tax obligations.
Understanding and applying the badges of trade help breeders and authorities classify breeding activities correctly, ensuring compliance with both licensing and tax regulations.
