ebay tax questions from a madman !!

unclealfie

A little advice needed !! I have rounded numbers to simplify this !

From 2004 to 2006 I was having marriage/stress/mental problems - off work 8 months and on anti-depressants. I have been fine since 2006, and am in paid employment for three days a week and paying tax/ni . But a 'side-effect' of the problems I had is that I went spending mad - I made around 1500 purchases on ebay totalling about £40,000 - jewellery, clothes etc - to collect or use or just because it was cheap- madness !!

I have since divorced and am now 'sane' again - My half of the settlement included all these goods I had purchased - For the last 18 months or so I have been reselling the goods through ebay to try and recoup some of my money - I have no record of the purchase prices of individual items as many of the purchases were 'boxes of assorted jewellery' etc - ( paypal and bank totals would be able to confirm the total amounts of the purchases though, just not for individual items ). I have probably sold about £25000 in the last 18 months.

I never declared anything to the tax people over this period. I was selling personal items, not items bought to trade - and also selling at a loss, so reasoned I did not have to.

During the last six months I started actually buying items from auctions and car boots specifically to see if I could do it and make a profit - just odd bits at first but now quite a lot. I read ebay rules and changed my status to business seller as I was buying to resell.

So --- what do I need to do about tax and registering as a business ? I am still showing about a £15000 loss or more on my initial purchases, but I still have some of those items - do I wait until I have made a profit before I register - it could be a year or two years from now before my sales actually exceed purchases. Do I have to seperate out items I buy and sell now and ignore my 'owned' items. Or do I have to register from when I said I was a business and do books from that date ? How do I account for selling an item now that I bought in 2004 and have no individual record of, just a record of 'total' purchases for that period. The only real record I would have of transactions would be bank movements over the last 5 years which would show an obvious substantial 'loss'

Messy isn't it !!?

fengirl_2

You need to separate out both in your mind and in your record keeping the items sold which were your own from the items which you have bought to re-sell. You have rightly said that your own items when sold are not taxable. You should not include these items in your accounting records.
If you started to buy to re-sell 6 mths ago, then that was the stage at which you started in business (not the date you registered with Ebay as a business). You should have registered with HMRC as self employed at that point and I'm afraid you have incurred a £100 penalty for not doing so. You need to register with HMRC as soon as possible and make sure your book keeping is set up properly so that you can produce your end of year accounts and do your self assessment.

blue_monkey_2

HMRC will waive the charge if you explain that you did not realise you had to do this before making a profit. I made this mistake, was making around £20 a week so did not register but after 6 months called them and when I explained why I had not registered they waived the fine.

Do seperate the 2 though, get yourself a personal selling account for your own personal things and then use the account you have now for business sales.

You can print off statements for the last 6 months of your trading on eBay which will show all of your sold items and the price you paid for insertion and the FVF. You can go back 18 months so might be an idea to print all of these incase the Taxman ever vists and then you can show they were your own personal things. But get a spreadsheet up and running and put your sold items in there. It'll be hard work to start with but highlight them on the invoices/statements from eBay and you can cross reference with the spreadsheet.

Your sales/costs have to be noted seperately so you'll need to analyse (have columns for) your:

Sale date
Sale Price (including postage - or have a seperate coloum for this, you can see if you are losing money)

Then your costs:
Cost Price (including postage)
Ebay Fees - Listing and FVF
Paypal Fees

Other expenses - such as postage, packaging materials, stationary such as paper and labels, travelling to and from the Post Office to post stuff (claim 40p per mile) and if you have a room set up in your house for working you can claim a pro-rata amount on your rent (if you rent, mortgage is more difficult I am not sure how to do this)/fuel/council tax/water rates - basically anything you need to be able to run the business.

If you sell less than 15k you'll be able to self assess for sales and costs - more than this they want more information but it is not huge and a simple spreadsheet will be sufficient to give them what info they need.

Also think about getting a business bank account and use this for business (most are free for at least a year), also for Paypal too - I can tell you from experience it get's very messy when using your own personal accounts. At least you will know what is yours and what is for work then.

Can't think of anything else off-hand as I've got a headache. I've been where you have been but before the internet (probably very lucky there) and it is so easy to do and people just do not understand. It is good to see that you have come out the other side now and are able to recoup some money. Funny how we never see it happening at the time though. Good luck.

unclealfie

Thanks for that.

Just to clarify - I will have to pay tax on any gains from items bought specifically to resell. The items I purchased previously that I lost money on - I will not be able to reclaim the losses against that gain for those ?

And - If I register today, and then next week

I sell 20 items for £10 each

15 of which I previously owned

5 new that I bought to resell - all from different seperate 'assorted boxed lots' bought in an auction for £20 a box

obviously an imaginary example - but how would I account for something like that - I might sell other items from one of the boxes and make a profit on that box, or sell nothing else from another box and make a loss on that box!!

Do I have to break it all down -- or would the tax people just expect a simple annual statement saying eg - total sales £2000, total purchases £1000 , remaining stock £300 , expenses £500 taxable profit £800. It would be impossible to assign a purchase price to each individual item as I do not know if other items will sell later. Then if I had an inspection they would presumably just look at bank statements to see if all looks reasonable - because if I buy loads of boxes of items at say carboots there will be no purchase invoices , unless I ask for a name address and receipt - in which case I would get laughed off the field !!

unclealfie

Sorry - but if someone can help I still am not sure about this. I can make a profit on items I buy now to sell - but can I not offset the £15000 losses from items I have already bought and sold - I thought there were no penalties if there was no tax to pay, so if I claim my start date as 18 months ago surely I can offset the losses ? ( or even pay the £100 fine to be able to offset the losses ?)

blue_monkey_2

No, you cannot offset that loss. You bought (for you, whether you used it or not) those goods are yours so you cannot claim losses on those, it is a sale of personal goods. Think of it this way, if you was able to do this then everyone would be claiming for the losses they made on selling personal stuff on eBay when they have bought it and not been able to get as much as they paid for it. When you initially purchased those goods it was not for business, if you intentionally go out and buy goods to resell then this is what you have to declare.

Yes, there are penalties if there is no tax to pay - this is why i got fined. As I said, I was only earning £20 profit a week and so thought the same. However, explain your situation and they will be quite leniant and revoke the fine. I would however not put it off any longer.

If you are putting something through 'the business' you must keep paperwork for everything you have bought and sold for business. You could try and see if you can get away with it but it will only take one inspection and you will be in bigger trouble than you are now. I have been employed a couple of places there has been a tax inspection so never take it for granted that they will not come. Keep all of your paperwork in order.

Do you work already? If you are earning tax PAYE then there will be no 'free' allowance for you will have to pay tax on all profits, after expenses, and your salary will be noted on your self assessment form when you submit it.

If you are really not sure what you are doing then get half an hour with an accountant to go through it all.

a11waysindebt

unclealfie wrote: »

A little advice needed !! I have rounded numbers to simplify this !

From 2004 to 2006 I was having marriage/stress/mental problems - off work 8 months and on anti-depressants. I have been fine since 2006, and am in paid employment for three days a week and paying tax/ni . But a 'side-effect' of the problems I had is that I went spending mad - I made around 1500 purchases on ebay totalling about £40,000 - jewellery, clothes etc - to collect or use or just because it was cheap- madness !!

I have since divorced and am now 'sane' again - My half of the settlement included all these goods I had purchased - For the last 18 months or so I have been reselling the goods through ebay to try and recoup some of my money - I have no record of the purchase prices of individual items as many of the purchases were 'boxes of assorted jewellery' etc - ( paypal and bank totals would be able to confirm the total amounts of the purchases though, just not for individual items ). I have probably sold about £25000 in the last 18 months.

I never declared anything to the tax people over this period. I was selling personal items, not items bought to trade - and also selling at a loss, so reasoned I did not have to.

During the last six months I started actually buying items from auctions and car boots specifically to see if I could do it and make a profit - just odd bits at first but now quite a lot. I read ebay rules and changed my status to business seller as I was buying to resell.

So --- what do I need to do about tax and registering as a business ? I am still showing about a £15000 loss or more on my initial purchases, but I still have some of those items - do I wait until I have made a profit before I register - it could be a year or two years from now before my sales actually exceed purchases. Do I have to seperate out items I buy and sell now and ignore my 'owned' items. Or do I have to register from when I said I was a business and do books from that date ? How do I account for selling an item now that I bought in 2004 and have no individual record of, just a record of 'total' purchases for that period. The only real record I would have of transactions would be bank movements over the last 5 years which would show an obvious substantial 'loss'

Messy isn't it !!?

I think you are in the sh1te my self. If it was a couple of quid no problem but £25,000 with another £15,000 in stock.:eek:

If you get away with it let me know how you done it. I will be doing the same.:rotfl:

blue_monkey_2

If the stuff was part of the divorce settlement then I would have thought it be noted by solicitors letter and should there be revenue investigation it would be clear they were personal items. The OP selling them recoups the money he/she would have got otherwise.