Inland Revenue cracking down on traders on eBay

Techno

This is where I get confused (and it's not hard)
If I buy a house (not my principle residence) and sell it on at a profit I make a capital gain so why is it that if I sell an item on e-bay it's classed as income??

WHA

Techno wrote:

This is where I get confused (and it's not hard)
If I buy a house (not my principle residence) and sell it on at a profit I make a capital gain so why is it that if I sell an item on e-bay it's classed as income??

If you buy ANYTHING with the intention of selling it for a profit, you are trading as profits are taxed for income tax, not capital gains. Property is no different to anything else.

Certain things come under the capital gains tax rules, mainly investments. So your property is only an investment and subject to capital gains tax rules if you intend to keep it for a while, i.e. to live in it or to rent it out (BTL). If you buy a house with the intention of selling for a profit, it is trading and you are taxed under the income tax regime.

powerbase

One thing which I don't think has been suggested yet and that is contact the IR themselves. They put courses on for startups and they are very helpful. If you are just starting out the SA tax bit you fill in (if your turnover is less than 15k) is 3 lines. Very simple. People see a lot of pages and writing and freak out. If you could on a free IR course they will take you through it line by line.

One other thing which I have mentioned on other threads is doing a tax return for your ebay business can often open peoples' eyes about how profitable or not their business is. I have seen people say they sold x items on ebay and they made £50, but they forget the listing fees, final value fees, paypal fees, petrol to the PO etc. and one big one is items you listed but did not sell.

Not saying everyone is like this but I have noticed when helping people start up they think their profits are more than they are as they see the money come in and forget about it going out as it's easily done. False economy sometimes. Then again you could argue some people do it for the fun.

The best thing (yes I did actually say that) about the tax return is it makes you face up and do your accounts properly (or well you should).

My problem with paying tax is what the govt waste it on but that's another thread.

Good luck with your ebay adventures.

One other thing is I read earlier that business lose out first year, break even second year and profit third year.

My business made a profit first and second year but recently the profits have been reinvested to expand the business so third year profits will be less. Does this look dodgy to the tax people? I'm really anal about my tax return so I'm not worried about them finding anything but really don't fancy the pain of going through an audit as I've heard it's not pleasant.

Regards

scoobydoo2_2

I've been told to stay away from the Inland Revenue, yes they will help you but they won't help maximise your tax saving (not in their interest). Maybe Golden Calculator could say if this is true?

Sugar_Coated_Owl

I definately think you need an accountant to maximise your tax savings.

Golden_Calculator

scoobydoo2 wrote:

I've been told to stay away from the Inland Revenue, yes they will help you but they won't help maximise your tax saving (not in their interest). Maybe Golden Calculator could say if this is true?

The Revenue have a job to do and generally they do it well. BUT - their main concern is definitely not about you paying the lowest amount of tax. Accountants always act in you best interest to get you the best deal within the rules.

In response to Powerbase's query I wouldn't see his trading results as particularly unusual. Some very successful businesses appear to make very little money on paper, however, the owners of those businesses do very well thank you. Its all about what you do with your profits and how you realise them. Year 1 loss, year 2 breakeven, year 3 profit may be a textbook startup guide but theory and practice are not always alike.

sarahlouise210

Golden_Calculator wrote:

The Revenue have a job to do and generally they do it well. BUT - their main concern is definitely not about you paying the lowest amount of tax. Accountants always act in you best interest to get you the best deal within the rules.

I disagree ...it is totally in HMRC interest for you to pay the lowest amount (right amount) of tax - if you dont it only causes extra work in delaing with repayment claims etc. HMRC policy is to try and make sure that the tax is correct throughout the year - hence PAYE tax cdes are reviewed and updated with known information and self employed are asked to make payments on account. There wil always be problems regarding fluctuations in income - however HMRC do not want you to pay more tax than is necessary;)

Golden_Calculator

sarahlouise210 wrote:

I disagree ...it is totally in HMRC interest for you to pay the lowest amount (right amount) of tax - if you dont it only causes extra work in delaing with repayment claims etc. HMRC policy is to try and make sure that the tax is correct throughout the year - hence PAYE tax cdes are reviewed and updated with known information and self employed are asked to make payments on account. There wil always be problems regarding fluctuations in income - however HMRC do not want you to pay more tax than is necessary;)

The lowest amount of tax is not the same thing as the right amount of tax. Thats like saying an apple is a banana.

Self Assessment does what it says on the tin. Individuals then pay what they have self assessed themselves to and the Revenue fully collect what is due whether through their coding, via payments on account or as a balancing payment.

The Revenue will never point out to a taxpayer that they could make a claim against their income for this, that or the other. It is up to the taxpayer to prepare and submit accounts and tax return making such claims as they see fit.

sarahlouise210

Golden_Calculator wrote:

The lowest amount of tax is not the same thing as the right amount of tax. Thats like saying an apple is a banana.

Self Assessment does what it says on the tin. Individuals then pay what they have self assessed themselves to and the Revenue fully collect what is due whether through their coding, via payments on account or as a balancing payment.

The Revenue will never point out to a taxpayer that they could make a claim against their income for this, that or the other. It is up to the taxpayer to prepare and submit accounts and tax return making such claims as they see fit.

well...I have worked for the Inland Revenue (Now HMRC) for 21 years ...and I can assure you I have spent a great deal of time pointing out what can be claimed and what cannot - yes it is up to the individual via Self Asst - but if you ask....then you will be told...and if you read all guidance and booklets that are sent out (for example on registering as Self Employed) then the information is there.

Sugar_Coated_Owl

So, is it better to get an accountant or is it fairly easy to do it yourself?