my son's idea....

vixen1065

Hi all,
Just found the site(first post) & think it is fantastic!!!
Hope you can help me with this one though!
My recently turned 16 year old student son, has had a very entrepreneurial outlook on life since an early age, & rather than work part-time for a pittance for somebody else, dearly wishes to start his own small web based business/registering as self employed etc - both selling on e-bay, & via his own website.
Personally, I'm delighted to see him driven by this goal - & will do anything I can to encourage & support his ambitions.
The snag we have hit is the fact he cant sign up for paypal(his age) as a method of payment.
He suggests using my paypal account as a means of accepting payment - & while I would be perfectly trusting of him, & keeping a good eye on his activity & transferring the proceeds of his sales to his bank account.
Expected turnover is estimated to lower than than tax threshold.
My questions are:

1/. Is this permitted/possible
2/. Would there be any possible tax implications arising out of this for ME????

thanks in advance...
DMC.

DevCoder

As your son will be using the paypal account for business, is your paypal account a business account?
Have you looked at the cost of the merchant fees they charge and factored this into the business plan and financials?

vixen1065

Hi & thanks,
Is it essential for the paypal account to be a "business a/c"???
I would have thought that more suitable when turning over large sums of money......he expects to maybe only have £1.5-3k total sales during the Summer.
DMC.

flea72

vixen1065 wrote: »

Hi & thanks,
Is it essential for the paypal account to be a "business a/c"???
I would have thought that more suitable when turning over large sums of money......he expects to maybe only have £1.5-3k total sales during the Summer.
DMC.

The criteria is using it for business selling. It bears no relation to turnover. As soon as you are buying items with the sole intention of selling on, you are operating an ebay/paypal business

As for tax. I take it your ebay account is linked to your bank account? If so any money going through it, will be taxed as though it was yours, not your sons. Also dont know how hmrc will view it in relation to your income tax

Its not as simple as just letting your son use your account

CLAPTON

I don't know much about Paypal but if your son is carrying out the business then any tax will be down to him and not you.

The fact it goes through your bank a/c isn't relevant although it would be easier accounting wise if it were separate.
Obviously he would need to keep records to show his transactions as distinct from yours.

vixen1065

flea72 wrote: »

The criteria is using it for business selling. It bears no relation to turnover. As soon as you are buying items with the sole intention of selling on, you are operating an ebay/paypal business

As for tax. I take it your ebay account is linked to your bank account? If so any money going through it, will be taxed as though it was yours, not your sons. Also dont know how hmrc will view it in relation to your income tax

Its not as simple as just letting your son use your account

There is no buying of anything to sell on - the raw materials will be obtained & the finished saleable articles created by himself.
My ebay account is linked to my paypal account, & all monies stay there until I physically transfer out to my bank. If I were to simply upgrade both ebay & paypal to business accounts they would therefore be legal to trade.

CLAPTON wrote: »

I don't know much about Paypal but if your son is carrying out the business then any tax will be down to him and not you.

The fact it goes through your bank a/c isn't relevant although it would be easier accounting wise if it were separate.
Obviously he would need to keep records to show his transactions as distinct from yours.

Nothing will reach my personal bank account.
The intention is to have all proceeds from any sales to be transferred directly from paypal directly to his own account.
Therefore from an accounting viewpoint, it will be relatively straightforward when it comes to sorting out the tax & ni contributions.......however that threshold figure will never be reached over the summer hols!!!

I don't want to pour cold water on his flames....but......
My concern is not about the technicalities of setting it all up for him - but rather possible tax implications for me!!!
And I NEED TO BE SURE.
Please keep the replies coming....much appreciated!!!
DMC

Cornucopia

vixen1065 wrote: »

I NEED TO BE SURE.

The only place to get that certainty is HMRC - phone your tax office and ask for their advice.

Richie(UK)

Devil's advocate reply:

HM Revenue & Customs officer as part of formal enquiry: Vixen, we have reason to believe that you have received income which has not been declared for tax purposes. We also understand that this business income was processed through a non-business Paypal account.

Vixen: It's alright, honestly it is. You see I'm just collecting it on behalf of my son and it would be below his Personal Allowance and so there won't be any tax to pay. And I didn't convert the Paypal account to a business account because ... er ... well I was trying to disguise the fact that it was business income so that ... er ... no, that's not what I meant to say ...

HMRC: I see.

DevCoder

You'd best to ask HRMC as the previous poster suggested, and also get the advice of an accountant as to how the books would be written up.

As regards paypal/ebay, you do need to consider these as upgrading the accounts to business accounts mean you are under far stringent t&c's and also there are additional costs ( fee per transaction plus a % on top) which will need to be factored into any profit margin.

I appreciate you dont want to "douse his flames" but does he have a sound business plan written out with financial projections?

Otherwise it will turn into a very expensive lesson. Very few people have a USP which make such a business viable.

DevCoder

He could set up a Paypal account himself, but just sign up as an 18 year old.

That, quite frankly, is idiotic advice. Why not just email ebay and paypal and tell them you're committing fraud.

flea72

vixen1065 wrote: »

There is no buying of anything to sell on - the raw materials will be obtained & the finished saleable articles created by himself.

I know i said buying, but that also means obtaining. selling anything that isnt an item you already own would be classed as business selling. Making items fot resale is the same. You don't own the item already, you are specifically creating it for sale.

Why do you think you are not a business seller, if you are selling things to try and make profit?