Inland Revenue cracking down on traders on eBay

stig

Cafenervosa, you said that

I still find it hard to believe that purchasing stock is not an outgoing or expense on the business.

The cost of stock is a business expense, but it needs to be matched to the income it produces - that's why you can't deduct the cost of stock you haven't sold yet, this is carried forward to be deducted when it finally sells next year (or the year after, or the year after that.......!)

To work out how much you can deduct for the cost of stock in a year, you simply

Start with the value of the stock in hand at the start of the year,
Add on anything you've bought during the year, and then
Deduct the value of what you've got left at the year end.

What you're left with is the stock you've actually sold during the year, and this is what you can deduct.

What you've got left at the year end goes forward to next year, and so on.

Accountancy is all about matching up income and expenditure, but you will get a deduction for it in the end!

Hope that helps,

Stig.

Hoddie_2

cafenervosa wrote:

Whats the deal with the percentage, how much do you need to be making before you pay more than £2.10 per week?

You pay Class IV National Insurance of 8% on any profit between £5,035 and £33,540, and 1% on any profit above that.

You are exempt from paying National Insurance contributions if you have reached state retirement age (currently 60 for women and 65 for men). You are also exempt from Class IV if you're 15 or under at the start of the tax year. If you pay Class I National Insurance (this is what you pay on PAYE employment income), you may be able to defer paying Class IV - contact the National Insurance office on 0845 302 1479 for information.

Golden_Calculator

If you are reading this the chances are you think you might be classed as a trader by the taxman? Correct?

Although there is a certain amount of scare mongering going on regarding ebay traders it is fact that HM Revenue and Customs are looking into ebay traders. But should that bother you? Not necessarily...

The fact of the matter is that once you deduct all the expenses you are entitled to the profit you make from your ebay trading is likely to be minimal. Ok, there are some exceptions who make good money from such trading but on the whole profits are modest.

I dont want to add to the negative vibes but I have had a lot of practical experience of cases where the taxman comes calling on the back of a tip off from someone you have crossed in the past. And when this happens the costs and stress it causes are not very pleasant.

So what am I suggesting?
Register with HM Revenue and Customs, take good advice on what you can claim against your income and pay whatever tax is due (which as I say is likely to be minimal unless you are doing exceptionally well).

I am a tax consultant (i.e. one of the 'good guys') and if anyone out there has any specfic queries about their personal circumstances and wants to run them past me please feel free to PM me.

bananaman1409

Thanks for the advice provided by PM and for sending me the spreadsheet for calculating my taxable income Golden Calculator. I think the spreadsheet would be really useful to other users of this forum. Is it available to download from anywhere?

Golden_Calculator

The spreadsheet was just something I prepared myself. I'm happy to send anyone a copy.

scoobydoo2_2

Golden_Calculator wrote:

The spreadsheet was just something I prepared myself. I'm happy to send anyone a copy.

What level of income do you think would be deemed trading, could i not claim it was a hobby?
Thanks

Sugar_Coated_Owl

If you are buying to sell then that is classed as a business and is therefore taxable.

sarahlouise210

Ebay has been monitored for a long time. Dont forget its not all doom and gloom ....you can trade on Ebay for 16 hours a week and claim tax credits!! Its not that hard to tot up 16 hours when you take into account finding stock...time on computer...packing and posting...travel etc. It can actually work to your advantage!

Golden_Calculator

scoobydoo2 wrote:

What level of income do you think would be deemed trading, could i not claim it was a hobby?
Thanks

As razorblade kisses correctly states if you purchase something to resell with and you have a profit motive then it will be taxable. Regardless of the amounts involved. Even if you are making losses you technically should notify of your trading activities.

You may think that you are selling items for more than they cost therefore you are making a profit. However, once you deduct things like p&p, listing fees, paypal fees, mileage (to go and post the items), use of home as office, telephone/internet use (business use only), accountancy fees, etc, etc then you may actually end up with very little to tax.

It may even be that you generate a loss in which case you may be due a tax repayment (depending upon other income) and the loss could help increase your tax credits position too.

scoobydoo2_2

Golden_Calculator wrote:

As razorblade kisses correctly states if you purchase something to resell with and you have a profit motive then it will be taxable. Regardless of the amounts involved. Even if you are making losses you technically should notify of your trading activities.

You may think that you are selling items for more than they cost therefore you are making a profit. However, once you deduct things like p&p, listing fees, paypal fees, mileage (to go and post the items), use of home as office, telephone/internet use (business use only), accountancy fees, etc, etc then you may actually end up with very little to tax.

It may even be that you generate a loss in which case you may be due a tax repayment (depending upon other income) and the loss could help increase your tax credits position too.

Is their scope to say it is a hobby rather than rather than trade, or am i just wishful thinking?

Could you pm me the calculator thing, might be worth looking at.

cheers