New Ebay Business - what records are required?

gmxdude

Hi All,

I am considering starting a business involving buying AND selling on ebay.

If so, when would a need to declare this to HMRC.

Also, what records would I need to keep? Would it be a case of keeping ebay purchases, sales and all paypal transactions? If so, how would I go about this?

Thanks.

patman99

You should tell HMRC as soon as you start.

As for record-keeping. You can use a good accounting program to keep track of your incomings & outgoings. A lot of people use Sage,but this can be very expensive for a sole trader.
I would suggest having a separate bank account for your business as you will be responsible for Tax on your profits.

If the business takes-off, you might want to consider becoming a Limited company as you can then offset business expenses against profits for Tax.

martindow

patman99 wrote: »

If the business takes-off, you might want to consider becoming a Limited company as you can then offset business expenses against profits for Tax.

I'm a bit puzzled about this. There could be advantages in becoming a limited company but any business offsets expenses against turnover to determine their tax.

vintagebrighton

I wouldn't recommend buying and selling on ebay unless you keep both accounts entirely separate. You don't want people knowing what you paid for stock and how much mark up there is.

You don't necessarily need to have a business bank account but you do need separate business and personal use paypal accounts. Do you already have a business paypal account? If not, you should be aware that initially any funds you receive could be held by paypal. Also, if it's a new ebay account you'll have restrictions on the number of listings you can have until you build your account.

Are you and experienced buyer and seller on ebay?
Do you have a good understanding of the different requirements of business and personal selling accounts?
Are you up to date with DSR's etc?
Do you know how much the fees for both ebay and paypal will take from your sales?

It's a bit of a minefield but can be rewarding (if hard work) Hope it goes well for you

simplydevine05

Definitly have two ebay accounts, one for buying and one for selling. You need to record every penny in and out. I use excel to do my books and set up as a sheet per month with columns for each type of income/expenditure and a front page which shows the profit/loss per month and tax year. Have you considered things like home insurance and telling your landlord or mortgage provider as if your stock is at home this may not be allowed. If you have a lot of stock then it will also need insuring. I use Direct Line for this.
Ebay is a complete minefield and there is very little protection for sellers. You need to research before buying anything to sell as the competition is huge in most areas. I used to sell clothing on there a few years ago and used to find myself in price war where I was making pennies on items. It wasn't worth it. Your Ebay account needs to be a registered business as does your Paypal account and you need to comply with the distance selling regulations (which thousands of sellers claim to do but are breaking the law with their refund policies, thus risking legal action from trading standards).
Good luck!

Pennywise

I know it's a pain, but I really do think that proper stock control accounting is needed for e-bayers.

I'd suggest a spreadsheet with a line for each stock item. For columns being date of purchase, purchase cost and ebay listing fee, then next group of columns being date of sale, amount paid by customer (inc postage), Paypal selling fee, ebay final final fee and postage cost. Then the final column is a calculation showing "profit", i.e. selling proceeds, less cost, less postage, less ebay fees and less paypal fees. Then your column totals will give you totals for your tax return, i.e. gross sales, then cost of sales (costs column totals) and then profit. You can then record and analyse your other costs using normal book=keeping, i.e. travel, packaging materials, telephone, etc etc.

Such a spreadsheet is a pain, there's no denying it, but you really would have very good figures showing exactly what items made your profit and it would easily highlight items where you've made only a small profit or loss. Get into the habit of updating it at every listing/sale and it would only take a few seconds a time - just don't forget about it and do it once a month (or longer) as then it would take hours to update!

When you get larger quantities, then you can replicate the above by using a proper accounting package, with built in stock control, linked directly to your website or ebay shop, but good systems are expensive, so best to do it manually on a spreadsheet until you know that your quantities and profits are sufficient.

System

You can download seller reports on ebay which I use for my accounts.
Use this as the sales figures.

Then record each purchase/expense in an excel sheet.