Sole trader TAX question

biscuit1_2

Hi i am working full time but recently started selling records on ebay stuff i owned just as a clear out really as i had tried to sell to record dealers who offered me stupid money for my collection, i sold em with a small profit took a small amount of my own money to buy a few more and sold them with the recent realisation i am now selling for profit, i make my own packaging for them as i am not happy with the stuff i have to buy, my question is related to tax, can i charge myself or the wife (as she actually makes them) for the packaging i make at the going rate i would pay if i purchased them, what do i do about the small investment i made to start with and the initial money i recieved from my personal collection do i off-set this against profit

CHEERS

Percy1983

The money from your personal collection is yours tax free.

In short you need to register as self employed.

Start with the items you purchased as expenses, plus the expense of selling (so packaging and postage and ebay fees).

To be specific on your packaging, you expense is your actual cost for materials, not time.

Take all this away from your income from selling to calulate your profit.

You then pay tax on your profit

If your income is less than £5725 then you can apply to not pay class 2 NI.

InsideInsurance

As a sole trader you cannot charge for your own time and so whilst you can deduct the materials for the packaging from your profits you cannot deduct your time.

Your wife it would depend on her relationship to "the business". You could take her on as an employee and give her a salary but inevitably she'd be taxed on that (depending on her earnings etc) or she could register herself as self employed too and produce these for you as her business but again she'll be taxed on it.

With either of the above you'd run the risk of HMRC deciding to investigate to see if she is really doing work or if in reality you do it all and pay her out of convenience to reduce tax liabilities.

Depending on the numbers involved it may or may not be worth the risk. Clearly large multinationals do something similar on a corporate level in that they make subsidiaries in high tax countries buy all their supplies at exaggerated prices from another subsidiary in a low tax country thus shifting the profit and lessening their tax. They however can afford very good accountants/ lawyers that can win against HMRC

biscuit1_2

Cheers for your help especially with my initial collection as i thought i would have to include it, as far as the packaging goes.. no pennies for the wife then.

Percy1983

biscuit1 wrote: »

Cheers for your help especially with my initial collection as i thought i would have to include it, as far as the packaging goes.. no pennies for the wife then.

Just buy her something nice with your profits.

Savvy_Sue

biscuit1 wrote: »

Cheers for your help especially with my initial collection as i thought i would have to include it, as far as the packaging goes.. no pennies for the wife then.

Hang on, she IS doing the work, so as long as your 'business' (you as a self-employed sole trader) still shows some profit after taking her wages out, then there's nothing to stop you employing her, IMO. Which would be worthwhile if she doesn't have any other income.

Percy1983

Savvy_Sue wrote: »

Hang on, she IS doing the work, so as long as your 'business' (you as a self-employed sole trader) still shows some profit after taking her wages out, then there's nothing to stop you employing her, IMO. Which would be worthwhile if she doesn't have any other income.

Yes and no.

In short my wife does help with my business at times but the extra paperwork in sending her a few quid and her registering as self employed for such a small amount of work isn't worth it. In my case there won't be any tax advantage either as we both work full time.

Mistral001

The fact that the OP can make any profit by buying records and selling them on Ebay is just amazing in my view let enough profit to warrant considering complex tax-saving schemes.

biscuit1_2

There is some money in records, not a lot but the right ones can sell for £40 upwards, just not your normal mass produced pop stuff

biscuit1_2

Especially ahem ..northern soul, if anyone wants some selling let me know ......my motives wernt to advertise but heyho.. lol

Percy1983

By all means if you know a lot about the products you are selling then good luck, I know I couldn't walk into a local record shop and spot anything I could make a profit on.

As mentioned above I am guessing profits aren't massive so there is little advantage to shift some to your wife I am guessing.