This involves "lending" money to his friend in the motor trade to buy a motor bike. When the bike is sold my client gets his "loan" returned with 50% of the money made on the deal. My client never owns (or even sees) the bike. There will be between 5 and 15 transactions a year depending on what comes up for purchase.
I have treated this money as loan interest as I couldn't see that it could be a trade as he does nothing besides paying money out and getting it back. The money is related to specific bikes. There is never a loss.
The tax helpline people were split on whether he was a trader or money lender. They said he would have to be registered as a money lender but he only lends to his friend - not the public.
It has recently been suggested that the money earned is commission. I can see the logic of this though it had never occurred to me as a possibility. What do others think?
If it is commission, should there be VAT paid? He is VAT registered because he does also buy and sell some bikes (I know - it actually gets worse but I will spare you the details)
If it is commission does that mean class 4 NI should be paid?