what is taxable

bellsmum

I Ive opened a drop shop using ebay and my home to sell peoples unwanted small items of furniture and other items,
I need to know how I would go on about the tax.
The items Ive sold at the minute are mine or donated from family members that were throwing them away or giving them to charity. Ive used the money to pay for flyers and adverts in the local paper
so these items are not taxable as they are mine.
Now Ive got my first client tomorrow and just wondering how the tax would work.
I sell the item and give them 40-50% of the selling price.
Now what is taxable The full amount taken for the item say £20. then I give the client £10 of it or the other £10 which is mine?
also the items im selling which are mine do i need proof to say they are, as each week will be different on selling items as I may sell 30 items and 25 are mine and 5 belong to clients
when I phone the tax up what do i register my self as
Thanks

fengirl_2

You need to keep records of all your trading income, but exclude the income from selling your own goods. The amount you receive for selling goods is your turnover.
Then you need to keep records of all the expenses incurred in selling goods which are not your own. This will include the seller's cut, postage, stationery, use of home, phone, etc. These are all added up at the end of the year and deducted from your turnover to produce your profit on whcih you pay tax.
This is a very simple answer and you might benefit from going to a Business Link or HMRC book keeping workshop.
You need to register with HMRC as soon as you receive your first income and you can do this online or over the phone. A separate bank account for trading income is good practice.
You cannot prove that certain goods are your of course, but by keeping bomb-proof records of all trading income and expenditure and by keeping the sale of private goods separate you are half way to convincing HMRC that you are a well run operation should you ever be investigated.

bellsmum

fengirl wrote: »

You need to keep records of all your trading income, but exclude the income from selling your own goods. The amount you receive for selling goods is your turnover.
Then you need to keep records of all the expenses incurred in selling goods which are not your own. This will include the seller's cut, postage, stationery, use of home, phone, etc. These are all added up at the end of the year and deducted from your turnover to produce your profit on whcih you pay tax.
This is a very simple answer and you might benefit from going to a Business Link or HMRC book keeping workshop.
You need to register with HMRC as soon as you receive your first income and you can do this online or over the phone. A separate bank account for trading income is good practice.
You cannot prove that certain goods are your of course, but by keeping bomb-proof records of all trading income and expenditure and by keeping the sale of private goods separate you are half way to convincing HMRC that you are a well run operation should you ever be investigated.

In away how could i prove items ive sold are mine and how would i keep sale of private goods separate when all are in the shop together?

I have a business account with my bank and all money goes into there.

I know I have to pay 20% on the earnings from a client

Pennywise

bellsmum wrote: »

In away how could i prove items ive sold are mine and how would i keep sale of private goods separate when all are in the shop together?

You'll have to keep "bomb proof" records separating total income into "personal" and "business" sales receipts and also splitting out your total costs into "personal and business" in a similar way. For example, ebay listing fees and paypal charges will have to be split which is easy because you can get an itemised list of each so just split them exactly as to what your costs are. Other items are more tricky such as your telephone and internet costs, postage, stationery, travelling, etc., but you'll have to split the costs as best you can. You just won't be able to claim any costs of selling your private stuff, so you need a mechanism to split total costs accordingly in a fair/reasonable manner.

At the very least, you need a complete list of everything you sell and allocate selling price and directly attributable costs against it. An excel spreadsheet could be used, with all items in one column, dates in the next, then further columns for selling price, fees, other costs, amounts paid to owner, leaving you with a "profit" figure before the general overheads.

Re private items, just remember that only things which you've used personally or originally intended to be used personally are "private". If you buy anything with the intention of resale, then it's business and taxable. In the first instance, it's simply down to your honesty, but the tax inspector may take an interest and open an enquiry for many reasons. Upon investigation, the taxman will take a very detailed look at everything you've bought and sold. He will expect your "private" items to be typically things that any reasonable household would be expected to buy, use and then sell - if he spots what he considers to be "too much" or "too many" then he'll start asking questions and you'll have to prove yourself. For example, selling a used bed is fine, but be prepared for questions if you sell a new one, or if you've already sold 4 beds and put another up for sale in quick succession. Basically, he'll probably accept a relatively large amount of "private" sales at the start whilst you are clearing your home, but as time passes, the number of "private" items would be expected to fall to a very low level.