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Do I have to pay tax on my eBay sales? Question of the week discussion
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# 1
MSE Jenny
Old 17-03-2009, 7:27 PM
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Default Do I have to pay tax on my eBay sales? Question of the week discussion

Q. Do I have to pay tax on my eBay sales?

A.
Selling your own stuff that you don't need anymore, such as cast-off clothing or second-hand stereos, is fine. However, online earnings become taxable when you become a trader, someone who sells goods bought with the intention of selling them, or makes items and sells them for profit.

The difficulty here is when it’s a grey area. If you’re not sure, you may need to take advice from an accountant, yet as a rule of thumb ask, ‘would a reasonable person, who knew the score, say you were trading or just selling your own stuff?’ One thing not to do is lie to the taxman; they have serious powers to investigate and if they do, the stories are nightmares.

Also if you’re a trader then the people who buy from you have full consumer rights (goods must be satisfactory quality, as described, fit for purpose and last a reasonable length of time).

There’s an HMRC guide to help you work out if you need to notify it about income made from online sales. Also see the Ebay Selling guide.

If you'd like to discuss this click reply below.

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# 2
soolin
Old 18-03-2009, 7:39 AM
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There is a lot of misunderstanding about this, so many times some very odd beliefs get posted. I have come across people who say that 'hobby' sellers aren't trading because they only sell a few bits as a hobby..no such tax relief I'm afraid. I've also seen claims that only new goods being sold attract tax, again wrong otherwise all those second hand book shops and antique shops would be laughing.

Yes people get caught and HMRC have always said that most people are reported by friends, family or neighbours. If you trade and don't declare it then who knows whether that cousin who is jealous of your income, or that man in the pub who overhears you saying how you buy and sell second hand cars...is going to report you.

Phone the dedicated HMRC line within 3 months of starting to trade to avoid penalties. They will be helpful, they offer courses if necessary and assist with business ideas if you struggle to work something out in your books. They will also be able to talk you through the National Insurance rules and exemptions and for income of less than £15,000 you really only need the most basic accounts.
I'm the Board Guide for the Ebay Board , Charities Board , Dosh & Disability , Up Your Income and the Local MoneySaving-England board which means I'm a volunteer to help the boards run smoothly, and I can move posts there. However, do remember, board guides don't read every post. If you spot an illegal or inappropriate post then please report it to forumteam@moneysavingexpert.com (it's not part of my role to deal with this). Any views are mine and not the official line of MoneySavingExpert.com
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# 3
alfiesmum
Old 18-03-2009, 7:53 AM
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I've been trading on eBay for a year, and I'm actually looking forward to puttng in my first tax return - HOW SAD IS THAT!!??

If you're buying things with the intention of selling on eBay, you're an earner, and like the rest of us should be paying into the pot.
I have to confess, when peeps on the board happen to mention they're selling 'about 300 items a month', and then it transpires they have a personal account to do it, so as not to pay tax, it does annoy me a tad actually.
But! Other people are none of my business, and as long as I know I've nothing to fear, I'm fine. All above board, it feels good.
If you are trading on eBay, and not declaring it to the tax man, just start from now. It's not as scary as it sounds, nobody is out to get you. It's the ones not paying tax that they're out to get......
Is it true do you think that the Tax Man has a system on eBay to check someones volume of sales etc to catch people doing it undeclared? I read that somewhere.
All it takes is a buyer that you've peed off, or a legit seller who wants to cause you some hassle, they take a quick trip to Goofbay, look at your volume of sales, and type up a quickie letter to the tax man. It's not worth it, get yourself registered to pay tax - that's what I say! And then you'll be filling in your three line accounts along with me next April!!

To answer the question under discussion - I personally don't think there is any confusion as to whether you should be paying tax. The confusion and the myths that Soolin has mentioned (I've heard some of those ones!), are made up by people determined to evade tax. Simple as that. The confusion is not if you should be paying, the confusion is what grounds are you going to plead when you're caught?
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# 4
soolin
Old 18-03-2009, 8:55 AM
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There were always rumours that HMRC had a reporting tool on ebay, I believe we have even had links to news items about this in the past.

However HMRC don't need such a tool as there is a report mentality on ebay and that works for them. Just hang about the seller discussion boards and see how quickly a serious thread turns to cries of 'report to HMRC' or 'I have sent a report to HMRC' to see what I mean. Be quick though as threads disappear very quickly. basically if some asks a question about a seller it is rare that more than a few posts go on before someone starts to question why a seller is using a personal account and yet sells say prams regularly. Or post using your own ID about a rogue buyer and see how quickly someone asks you why you are not properly declared as a business..

Even on here when we get long threads about rogue sellers there is usually a suggestion and a link on where to report them if they are mis registered.

Also some other links that people might find useful:

http://www.theregister.co.uk/2007/02..._tax_guidance/
I'm the Board Guide for the Ebay Board , Charities Board , Dosh & Disability , Up Your Income and the Local MoneySaving-England board which means I'm a volunteer to help the boards run smoothly, and I can move posts there. However, do remember, board guides don't read every post. If you spot an illegal or inappropriate post then please report it to forumteam@moneysavingexpert.com (it's not part of my role to deal with this). Any views are mine and not the official line of MoneySavingExpert.com
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# 5
soolin
Old 18-03-2009, 8:56 AM
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Actually I have found a news link about the alledged reporting tool that HMRC use:

http://news.bbc.co.uk/1/hi/business/6354003.stm

The HMRC is not just relying on the hot-line for evidence.
It is using a robotic computer software programmes, called Xenon, to scan internet sites like Ebay and look for people making multiple transactions.
"It is much more efficient than trying to do the same thing manually as we have in the past," said the spokesman
I'm the Board Guide for the Ebay Board , Charities Board , Dosh & Disability , Up Your Income and the Local MoneySaving-England board which means I'm a volunteer to help the boards run smoothly, and I can move posts there. However, do remember, board guides don't read every post. If you spot an illegal or inappropriate post then please report it to forumteam@moneysavingexpert.com (it's not part of my role to deal with this). Any views are mine and not the official line of MoneySavingExpert.com
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# 6
mustrum_ridcully
Old 18-03-2009, 12:17 PM
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Quote:
Originally Posted by soolin View Post
Actually I have found a news link about the alledged reporting tool that HMRC use:

http://news.bbc.co.uk/1/hi/business/6354003.stm

The HMRC is not just relying on the hot-line for evidence.
It is using a robotic computer software programmes, called Xenon, to scan internet sites like Ebay and look for people making multiple transactions.
"It is much more efficient than trying to do the same thing manually as we have in the past," said the spokesman
Yeah I think it would be fairly straightforward for HMRC to use something like this to spot non taxpayers. Chances are the system will look for patterns over time particularly type of item and how often. Someone selling 10 DVDs in one month won't ring alarm bells but someone selling 10 DVDs every month for a year might.
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# 7
rarrarrar
Old 18-03-2009, 6:43 PM
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Besides Tax, remember if you are selling as a business you must:
- publish your trading title and a geographical address which can be used for contact
- abide by the Distance Selling Regs and so offer refunds.
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# 8
alfiesmum
Old 18-03-2009, 7:20 PM
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Definitely offer refunds if you're using Buy It Now format. But if using auction format it's not law.

Can the address be on the 'me' page? That's where mine is at present.
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# 9
RFW
Old 18-03-2009, 8:36 PM
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Quote:
Originally Posted by soolin View Post
The HMRC is not just relying on the hot-line for evidence.
It is using a robotic computer software programmes, called Xenon, to scan internet sites like Ebay and look for people making multiple transactions.
"It is much more efficient than trying to do the same thing manually as we have in the past," said the spokesman
I have been on the receiving end so can clarify this is true. Although I was registered for Tax and VAT the address held by Ebay was different to my registered Tax address so I was showing as a non payer! HMRC had collated my turnover over a couple of years and made a general enquiry to catch me out if I had supplied them with false info.

Continuing that topic, its worth noting about VAT, the threshold s currently £68,000 (I think) so anyone taking more than that in any 12 month period (including postage) should be registered.

Last edited by RFW; 18-03-2009 at 8:44 PM.
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# 10
RFW
Old 18-03-2009, 8:41 PM
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Quote:
Originally Posted by rarrarrar View Post
Besides Tax, remember if you are selling as a business you must:
- publish your trading title and a geographical address which can be used for contact
- abide by the Distance Selling Regs and so offer refunds.
Distance selling regulations (as mentioned above) do not apply to auctions. They also (obviously) only apply to goods sent by post or courier and not to collected items.
There are other exceptions for refunding by DSR, but generally refunds should be offered.

Address/contact details are fine on the 'about me' page.

Back with tax, I'm aware that some people make stuff to sell on Ebay as a hobby and don't mind losing money, so it could also be advantageous to be registered for tax in such cases.

As well as advice from HMRC many accountants offer initial free consultations and Citizen's Advice Bureaus can be helpful too, especially regarding tax and earning on bemefits.
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# 11
Muffy0
Old 18-03-2009, 11:50 PM
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So where do I stand as someone who sells a lot competition wins - all brand new items. Are tehy my personal items as I haven't actually purchased them - therefore I don't have to inform the tax people?

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# 12
RFW
Old 19-03-2009, 12:30 AM
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Quote:
Originally Posted by Muffy0 View Post
So where do I stand as someone who sells a lot competition wins - all brand new items. Are tehy my personal items as I haven't actually purchased them - therefore I don't have to inform the tax people?
Not my field of knowledge but as I understand it certain wins are classed as taxable and some aren't. You would need clarification from HMRC.

I'm sure there is a block on a possible loophole of people claiming all the stuff they sell are prizes from a competition set up by their brother or sister!
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# 13
jenniewb
Old 19-03-2009, 1:55 AM
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Wow- am bit concerned but a bit relieved- I doubt I scratch upto more then £100 on ebay- in a whole year- and thats likely to be a one off (I gained weight and had to sell swap or throw away my entire wardrobe- even the socks!) I made £100 about 2 years ago, I was in a minimum wage job and needed the cash for food! I doubt I will get that again, but the tax and etc does put me off selling on ebay (as well as ebay fees and bad buyers...).

Is there a threshold you don't need to report on? or is everything over 1p liable to pay 15% tax?
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# 14
amcluesent
Old 19-03-2009, 6:48 AM
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>Is there a threshold you don't need to report on? or is everything over 1p liable to pay 15% tax?<

There's no threshold, you are either trading or not. And if you are trading, then sales income is added to other earning and taxed after your usual personal allowances, plus you can offset business costs.

Last edited by amcluesent; 19-03-2009 at 10:33 AM.
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# 15
rarrarrar
Old 19-03-2009, 9:15 AM
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The HMRC document is very readable and most people will have no problem deciding their status; even then buying and selling the odd (moderate value) item every month is unlikely to be noticed.
The address requirement (EU law) is frequently flouted and not just on Ebay with many of the domain names being also registered as a "private individual" with details withheld.
Sorry , of course DSR doesnt apply to genuine "auction items".
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# 16
wheresmydoshat
Old 19-03-2009, 4:15 PM
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ever so slightly off topic...

i am an ebay trading assistant, so i sell other peoples items.

am in still liable for vat once my turnover goes over the threshold ? or am i just charging for a service ?

a lot of the stuff i am selling is for a business client, so mostly brand new. but none of its actually mine, just the money comes through me and i take my cut.

i get different answers every time i ask hmrc !
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# 17
RFW
Old 19-03-2009, 4:56 PM
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Quote:
Originally Posted by wheresmydoshat View Post
ever so slightly off topic...

i am an ebay trading assistant, so i sell other peoples items.

am in still liable for vat once my turnover goes over the threshold ? or am i just charging for a service ?

a lot of the stuff i am selling is for a business client, so mostly brand new. but none of its actually mine, just the money comes through me and i take my cut.

i get different answers every time i ask hmrc !
From my auction house days, you need to be VAT registered if the money you take in goes over the threshold, you are in effect buying all the goods you sell.
For example if you sell something for £100 and take 10% commission, it is exactly the same as you buying an item for £90 and selling it for £100, your turnover in that instance is not £10 but £100.
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# 18
wheresmydoshat
Old 19-03-2009, 5:20 PM
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okay, thanks for that.

i am going to be borderline threshold so i may be okay anyway, but always helps to know what to expect.
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# 19
StaffsSW
Old 19-03-2009, 5:36 PM
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Quote:
Originally Posted by wheresmydoshat View Post
ever so slightly off topic...

i am an ebay trading assistant, so i sell other peoples items.

am in still liable for vat once my turnover goes over the threshold ? or am i just charging for a service ?

a lot of the stuff i am selling is for a business client, so mostly brand new. but none of its actually mine, just the money comes through me and i take my cut.

i get different answers every time i ask hmrc !
This question was asked elsewhere, and after some research and advice, it comes down to who receives the money for the sale (regardless of ownership/title of the goods) - do you take it, then pass it back to your customer less your share, or does the buyer pay your customer direct, then you receive a separate payment?

If it is the latter, then your earnings are simply the commission you charge, but if the eBay buyer sends money to you, and then you pass it on less commission to your customer, then the total amount received by you is counted towards the VAT limit.

To be honest though, if you are getting to that sort of turnover, it is probably better to seek help from an accountant - you have quite a unique situation, and it's unlikely that you could get a definitive answer from anyone of us on here.
<--- Nothing to see here - move along --->

Last edited by StaffsSW; 19-03-2009 at 5:38 PM.
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# 20
wheresmydoshat
Old 20-03-2009, 10:31 AM
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cheers for that. its certainly baffles them at hmrc when i phone them !

i could quite easily set it up differently so i was just being paid my commission.

as i will be quite close to the threshold this sounds like a plan.
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