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As an example, let's say a friend of yours is selling their car, and they also need some DIY work doing on their house. If you do the DIY work for them, and they give you the car as payment, do you need to pay tax on this?

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Yes

If the transaction is one that would attract tax if settled by cash, it attracts tax if settled by barter.

For example, a private person selling their second hand car is not a taxable transaction. If done by a second hand car business it is. Similarly, a mate doing some DIY for you is not taxable in your hands. A mate who’s business it is to do DIY work (e.g. a builder or other tradesperson) doing work on your business premises is different.

However, if it is clearly a transaction when something of value is traded for something of commensurate value then tax is payable. Where it gets murky is in a situation of reciprocal gift giving.

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    Selling a car privately and doing some one-off DIY are not similar at all. The former is selling something for what you have previously paid with money that would have been taxed when earned, thus it makes sense not to tax again when selling the car. A car for one-off DIY is payment for work (although paid not in money) that needs to be taxed like any other work income. – Greendrake Jul 21 '19 at 5:46
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    A mate who does some DIY work for you without pay (or paid in beers at the pub) is not taxed. A mate who does some DIY work for you, and then you pay him £200, whether he has a business or not, is taxable. Most of the time, HMRC will not know about it and it will not be taxed. – gnasher729 Jul 21 '19 at 16:15
  • If a "private person" sells a car for more than they paid for it, income tax will be due. – George White Jul 21 '19 at 21:23
  • @GeorgeWhite only if you are a “trader” - theregister.co.uk/2007/02/09/ebay_uk_traders_tax_guidance – Dale M Jul 21 '19 at 21:42

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