This is an example of how a hobby can become a business: Read more about hobby or business. 

For reasons of space, only certain combined items have been completed in the voucher summary in the forms. The examples show the scope of the commercial activity, but not how any taxation of the individual items will be carried out. The example also does not show value added tax or registration in the VAT Register.

Year 1 - Fitting out of stalls and purchase of foals                          

Peder is a salary recipient and owns a smallholding where he rents out land. He is interested in trotting and wants to see whether it's possible to train one or more hoses that could win prizes on the trotting track. He purchases three foals of reasonably good breeding.

He believes and hopes this will eventually become an income-generating activity. He is aware that he can claim deductions for his costs for up to five start-up years if he is successful and the trotting project goes so well that he'll be seen as an “enterprise” by the tax authorities. He therefore decides that from his first year he'll retain his vouchers and complete form RF-1298 Oppstart av virksomhet - Bilagsoversikt (Starting a business - Summary of vouchers, in Norwegian only).

Date	Voucher	What	Income	Cost
	1	Purchase of building supplies - nails, screws, etc.		2,800
	2	Purchase of oats		5,300
	3	Purchase of hay		4,600
	4	Purchase of equipment for the horses		5,000
	5	Purchase of three foals		90,000

(The purchase of foals is not an ordinary cost from a tax perspective, but will still be included in order to document the activity.)

Year 2

During year 2, Peder buys more equipment plus feed for the horses. 

Date	Voucher	Description	Income	Cost
	1	Purchase of miscellaneous equipment		15,000
	2	Purchase of feed		15,000
	3	Purchase of sulky (a racing cart)		12,000
	4	Payments for veterinary surgeon and medicines		4,000

Year 3

During year 3, one of the horses suffers an injury and has to be destroyed. The other two horses are fed and trained. A professional trainer is hired for a while.

Date	Voucher	Description	Income	Cost
	1	Purchase of feed		20,000
	2	Payments to trainer		21,000
	3	Settlement for slaughter of one horse	6,000
	4	Payments for veterinary surgeon and medicines		5,000

 

Year 4

The two horses are now promising well-trained three year-olds and starting on the trotting track. They win more monetary prizes on betting races.

Peder realises that the venture is generating a profit. However, he is aware that it's a condition for getting his venture approved as “taxable activity” that the activity is likely to generate a profit over time.  As trotting prizes are an uncertain source of income and the horses are so young, he therefore decides to wait another year before deciding whether or not to submit an income statement.

Date	Voucher	Description	Income	Cost
	1	Purchase of feed		20,000
	2	Payments to trainer		30,000
	3	Miscellaneous prizes	90,000
	4	Payments for veterinary surgeon and medicines		8,000

 

Year 5

In year 5, the horses continue their success. The total prize money now amounts to NOK 380,000, while total costs amount to NOK 90,000. The net income/profit is NOK 290,000.

Over the coming years, Peder now expects the horses to win at least as much prize money as he won in year 5, and that he'll therefore meet the condition for the horse team being seen as taxable activity. He prepares a full set of accounts for year 5, submits an income statement and transfers the result from the income statement to his tax return.

Together with the income statement, he submits form RF-1298 with an overview of vouchers for each of the four previous start-up years.
 
The tax office will now assess whether Peder meets the conditions for running a taxable activity. If so, they will then assess when this activity actually started and whether there are any grounds for amending the tax assessments for previous income years.

If the conditions are met, Peder's tax assessment will be amended for the start-up years that are approved, with the changes to taxable income that the tax office deems relevant following an assessment of the submitted voucher summaries and any dialogue with Peder.

See also guidelines for matters concerning taxes and VAT in the equine sector