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Whether the activity you are undertaking is a business or not for tax purposes depends on the circumstances.

The definition of a business is important for the following two reasons:

• The gross income of any person includes any amount derived from any business.
• Certain incentive deductions and allowances are available to taxpayers who carry on a business.

The word \"businesses\", for the purposes of the Income Tax Act, includes any profession, trade or manufacture carried on for pecuniary profit. Thus it is fundamental that there must be an intention of making a profit. Profit in a business may not be immediate but if requested to illustrate the running of a

business and the intention to achieve profitability by the Inland Revenue (who keep an eye on financial statements of those who are continually making losses) the taxpayer must be able to prove that a structure is in place which confirms this. Matters that may be considered in ascertaining the taxpayer\'s intention are:

• statements by the taxpayer as to his or her intentions
• the nature of the activity
• the period over which the taxpayer engages in that activity
• the scale of the operations and the volume of transactions
• the commitment of time, money and effort
• the pattern of activity
• the financial results
• whether the operations involved are of the same kind and are carried on in the same way as those which are characteristic of ordinary trade in the line of business in which the venture was conducted.

Pecuniary profit, as determined in the definition of \"business\", which the taxpayer must intend to gain, must be a profit in money or money’s worth. An intention to engage in activities which amount to no more than the pursuit of a hobby should not be equated with the intention to make a pecuniary profit, and thus should not be regarded as a business and not processed in an income tax return in order to claim any expenses that may have been incurred.