Declare my source of income?

hogweed

Here’s a slightly strange question. I have recently taken advantage of a business opportunity whereby a man I know who owns a large business wishes to dispose of regular batches of sub-standard goods – he delivers them to me, and I fix them/clean them up then sell them on eBay. It’s too small for him to bother with.

The goods are absolutely legit – he’s a big national concern, and these are customer returns. However, it’s become clear that he doesn’t want to involve taxation in this aspect of his business, so doesn’t want ME to declare my earnings to the tax man.

I intend to declare them, end of story. I’m not the sort of person who can get a good night’s sleep if I have to worry about something like this! However, his concern is that the tax man will then want to know where I get the goods from.

My (perhaps naïve) belief is that, in his dealings with me, the tax man is concerned only with whether I pay the correct amount of income tax or not, which I intend to – what my supplier does is between HIM and the taxman. And of course, I don’t KNOW that he’s planning to evade tax – I merely suspect it.

Am I exposing myself in any way here? I will be absolutely honest with the tax man, but I’m fairly new to any kind of self-employment, and not sure whether I have to declare somewhere where I get the goods from etc.

Thanks to anyone who can help!

Ted

RabbitMad

I think you are correct here. Just make sure you declare the correct tax and then you'll be fine (after all HMRC don't know if your buying stuff from asda or some bloke in the pub)

The only issue here would be if you trip over the VAT threshold where you would need vat receipts from your supplier to claim the vat back

fengirl_2

The tax man is not bothered where you get your goods from, but he will want to see purchase invoices to back up the deduction you will include for them in your accounts. Is this man prepared to give you such invoices?

hogweed

fengirl wrote: »

The tax man is not bothered where you get your goods from, but he will want to see purchase invoices to back up the deduction you will include for them in your accounts. Is this man prepared to give you such invoices?

Well, here’s the thing – that doesn’t happen either. I pick up a pile of goods from him, and no money changes hands. When I sell them on eBay, I deduct my commission and send the rest to him. So, apart from my eBay fees, I haven’t really got any expenses to declare!

I suppose all I have in the way of documentation really is my statements form eBay/Paypal, and my bank statements showing the money coming in from Paypal and going out to his account.

My (very limited) experience of the tax man is that he doesn’t ask for receipts or anything unless he decides to inspect you. If he doesn’t, no problem – if he does, then my supplier is rumbled when Mr Tax asks me where all the payments have been going to, but I’ve still done nothing wrong as I’ve been paying my taxes…?

saveallmymoney

This is a strange situation.

I would guess that he is claiming to have written off this stock as far as his business is concerned, and is then directly pocketing the money you send him?

hogweed

saveallmymoney wrote: »

This is a strange situation.

I would guess that he is claiming to have written off this stock as far as his business is concerned, and is then directly pocketing the money you send him?

I really don't know. Up to now, I have only concerned myself with whether (a) they good are stolen (absolutely not) or (b) if I personally am doing anything "dodgy". I don't really know his situation, but it may well be something like that.

Baz_2

I would just declare your cut as income rather than declare the full sales value and the full purchase price. There doesn't seem to be a purchase price therefore you don't need purchase invoices off him.

Your expenses you deduct form your commission will be your repair costs and any overheads associated with doing that.

I would also when passing over his cut do a self billing invoice/remitance and give it to him. i.e Sale price less commission equals amount paid to him. What he does with it is another matter and up to him. Even if he does not accept it you have them for your records.

You will then have paper work for the total sales price from ebay and you income from the self billing invoice and the cost of the goods does not come into it.

As long as your commission is not over the vat limit, i.e around £60k there's no vat issue.

fengirl_2

The point of my post was to point out that if you are investigated you would have to produce purchase invoices.
I would just declare your income as commission.

hogweed

Baz wrote: »

I would just declare your cut as income rather than declare the full sales value and the full purchase price. There doesn't seem to be a purchase price therefore you don't need purchase invoices off him.

Your expenses you deduct form your commission will be your repair costs and any overheads associated with doing that.

I would also when passing over his cut do a self billing invoice/remitance and give it to him. i.e Sale price less commission equals amount paid to him. What he does with it is another matter and up to him. Even if he does not accept it you have them for your records.

You will then have paper work for the total sales price from ebay and you income from the self billing invoice and the cost of the goods does not come into it.

As long as your commission is not over the vat limit, i.e around £60k there's no vat issue.

Yes, thanks that's what I was kind of hoping to do. And certainly nowhere remotely near £60k I fear!

minimike2

My main concern would be dealing with someone willing to commit tax evasion.

johnllew

fengirl wrote: »

The tax man is not bothered where you get your goods from

I think he might be. If the OP is investigated, he will no doubt be asked for the source of these free goods and the HMRC will be intrigued if he refuses to tell them.