Buying/selling cars as a side business?

londonTiger

motorguy wrote: »

No assumptions made at all - the O/P said originally that they planned to be "buying & selling cars as a private seller", which is a common dodge by traders to avoid SOGA responsibilities, tax and VAT.

They also subsequently said "Okay, but why can't I just buy a car privately (one which already has MOT) and the sell it in a months time as a private seller?" which again suggests they want to avoid their SOGA and HMRC responsibilities.

So no assumptions made really - the O/P wants to duck and dive around their responsibilities.

Whilst several people have picked up on this and questioned it, the O/P has also been given good advice, both about being a legitimate business and about the pitfalls of part time motor trading.

These are absolute assumption. Firstly seller will not be liable for any VAT unless they go past the VAT threshold. evading SOGA is probably the only thing you got against him. The tax dodge is absolute absurd.

There is all sorts of conflicting advice even from the tax authorites. case in point I was importing goods from america for business use. VAT helpline says I need to submit an EORI number to the shipper before the goods land on the UK for my business to reclaim import VAT. I did not know about EORI and according to the VAT helpline I cann't reclaim the input VAT. I contacted the shipper to see if I could get the EORI done retrospectively which the shipper stated it would be cost prohibitve and cost me £50 per shipment. They sent me a VAT document from the customs authorities which said that for the purpose of reclaiming VAT if the value of goods are below £600 an EORI is not needed.

There are all sorts of areas in taxation which is open to intrepretation and there are even contradicting advice on various documents issued by HMRC. You are clearly trying to intrepret the law against the OP as much as possible.

Wheter someone selling 1 or 2 cars a month is private or commercial seller is debatable. If OP buys 2 cars a month to sell and users the two cars as his personal vehicles and drives around in them, is he a commercial seller?

Whatever the answer is neither trading standards nor HMRC will care. HMRC will want him to just disclose his profits for taxation purposes and that would be the end of the matter.

If he does sell privately he will have to match typical private sale prices which will leave hardly any profit.

motorguy

londonTiger wrote: »

These are absolute assumption. Firstly seller will not be liable for any VAT unless they go past the VAT threshold. evading SOGA is probably the only thing you got against him. The tax dodge is absolute absurd.

I said it was a dodge by traders, not necessarily specifically the O/P

I know many "private" traders who stay beneath the radar and have turnovers in excess of the VAT threshold.

The O/P then subsequently went on to talk about reselling his own cars in relation to tax avoidance

londonTiger wrote: »

There is all sorts of conflicting advice even from the tax authorites. case in point I was importing goods from america for business use. VAT helpline says I need to submit an EORI number to the shipper before the goods land on the UK for my business to reclaim import VAT. I did not know about EORI and according to the VAT helpline I cann't reclaim the input VAT. I contacted the shipper to see if I could get the EORI done retrospectively which the shipper stated it would be cost prohibitve and cost me £50 per shipment. They sent me a VAT document from the customs authorities which said that for the purpose of reclaiming VAT if the value of goods are below £600 an EORI is not needed.

There are all sorts of areas in taxation which is open to intrepretation and there are even contradicting advice on various documents issued by HMRC. You are clearly trying to intrepret the law against the OP as much as possible.

Yes, absolutely. The O/P needs to realise they have obligations that should not be avoided, both under SOGA and HMRC. If they seek proper advice from an accountant before starting their business he/she will instruct as to actual requirements.

londonTiger wrote: »

Wheter someone selling 1 or 2 cars a month is private or commercial seller is debatable. If OP buys 2 cars a month to sell and users the two cars as his personal vehicles and drives around in them, is he a commercial seller?

Whatever the answer is neither trading standards nor HMRC will care. HMRC will want him to just disclose his profits for taxation purposes and that would be the end of the matter.

You can debate it all you like. If you're buying two cars a month, with the purpose of selling for profit, then you're trading and MUST register with HMRC. That is not open for debate.

So, no its not just a matter of declaring profits at year end, you need to register as soon as you start trading, or face a fine.

londonTiger wrote: »

If he does sell privately he will have to match typical private sale prices which will leave hardly any profit.

Hence what we have been saying - its not worthwhile financially.

And thats aside from the pond scum you would be for doing it.

bobbymotors

It just won't work I'm afraid.


You need:


Trade name and VAT number (otherwise any auction will not give you the v5)
trade plates (otherwise you are driving untaxed)
trade insurance (as above, but no insurance)
a cheap and reliable and good painter, cars have to be cosmetically good
as above with a mechanic who will put right any major faults and drop things for you at a moments notice
HPI facilities as you need to check what you are buying or taking in px is not on finance or written off
an aircon man that knows what he is doing not just a kwik fit gas up
a friendly MOT station that will replace bulbs etc foc and not try to get extra work out of you
a reliable source of stock to buy (FYI I rarely bought anything from auctions)
losing money on 1 car in 8 even after being in the job for 10 years
taking a px that is subsequently worthless due to undeclared problems


I could go on and on.


Don't do it OP.


Or do it if you fancy throwing a load of money away for at least a year whilst you are learning. It took me a year and I learn fast.

ChumLee

londonTiger wrote: »

there's a reason used car salesmen have a bad rep. A lot of small time dealers just buy cars cheaply and hope for a wing and a prayer and sell it on with a couple hundred quit mark up.

They hope there is nothing wrong with the car and they've made a decent proft. Probably 10% of them come back with faults which usually writes off 2 cars worth of profit to rectify.

Really really dodgy dealers will refuse to accept the cars fault and not refund or replace.

That';s my impression on how a used car place works.

Yes, this.

londonTiger wrote: »

These are absolute assumption. Firstly seller will not be liable for any VAT unless they go past the VAT threshold. evading SOGA is probably the only thing you got against him. The tax dodge is absolute absurd.

There is all sorts of conflicting advice even from the tax authorites. case in point I was importing goods from america for business use. VAT helpline says I need to submit an EORI number to the shipper before the goods land on the UK for my business to reclaim import VAT. I did not know about EORI and according to the VAT helpline I cann't reclaim the input VAT. I contacted the shipper to see if I could get the EORI done retrospectively which the shipper stated it would be cost prohibitve and cost me £50 per shipment. They sent me a VAT document from the customs authorities which said that for the purpose of reclaiming VAT if the value of goods are below £600 an EORI is not needed.

There are all sorts of areas in taxation which is open to intrepretation and there are even contradicting advice on various documents issued by HMRC. You are clearly trying to intrepret the law against the OP as much as possible.

Wheter someone selling 1 or 2 cars a month is private or commercial seller is debatable. If OP buys 2 cars a month to sell and users the two cars as his personal vehicles and drives around in them, is he a commercial seller?

Whatever the answer is neither trading standards nor HMRC will care. HMRC will want him to just disclose his profits for taxation purposes and that would be the end of the matter.

If he does sell privately he will have to match typical private sale prices which will leave hardly any profit.

It's called trying to dodge your responsibilities as a trader.

motorguy

londonTiger wrote: »

there's a reason used car salesmen have a bad rep. A lot of small time dealers just buy cars cheaply and hope for a wing and a prayer and sell it on with a couple hundred quit mark up.

They hope there is nothing wrong with the car and they've made a decent proft. Probably 10% of them come back with faults which usually writes off 2 cars worth of profit to rectify.

Really really dodgy dealers will refuse to accept the cars fault and not refund or replace.

That';s my impression on how a used car place works.

And therein lies the problem - to make decent money at it you need to stiff the customer at every opportunity and dodge the tax man.

To do the job right, you cant compete with these cowboys yet people will still meet some fly by night merchant at Tescos 50 miles away rather than pay an extra few pounds from a legit seller.

londonTiger

motorguy wrote: »

And therein lies the problem - to make decent money at it you need to stiff the customer at every opportunity and dodge the tax man.

To do the job right, you cant compete with these cowboys yet people will still meet some fly by night merchant at Tescos 50 miles away rather than pay an extra few pounds from a legit seller.

There you go with the tax dodge again. Taxes are paid in proportion to earnings. If there are no earnings there are no taxes, if there is a modest profit there is a modest amount of tax (depending on OPs tax band from other employment).

Has it occured to you that perhaps small traders have very little overheads. They dont have to pay massive rates and business rent which means they can skim on profits.

I feel the "they dont pay tax" is the motor traders smear campaign of small time car dealers. Just like I hear black cab drivers smearing all other minicab drivers "they dont have insurance", "they dont know the roads like we do" etc. I heard one black cab driver on the lbc radio show smearing the car pooling service saying that car pooling website is risky and the driver will need hire & reward insurance.

plenty of dodgy traders with large forecourts. I've been to some used car places where they slap on a stupid markup. Like £500 more than the market rate and just cant give you their acceptable figure and you have to go through all the dance of lowballing in and meeting half way.

And the usual sales patter..

"I have 3 calls about this car today" - then why are you ringing me to chase me?
"it's got a full service history" - yeah up til 4 years ago.
"It's a good runner" - as in the engine works?

motorguy

londonTiger wrote: »

There you go with the tax dodge again. Taxes are paid in proportion to earnings. If there are no earnings there are no taxes, if there is a modest profit there is a modest amount of tax (depending on OPs tax band from other employment).

Because thats what we're talking about - people advertising as "private" sales, and trying to use the taxation system to suggest they're not motor trading. These people are trying to avoid their responsibilities under the SOGA, and invariably, arent paying tax.

Its a massive problem - you being an apologist for it doesnt change that.

londonTiger wrote: »

Has it occured to you that perhaps small traders have very little overheads. They dont have to pay massive rates and business rent which means they can skim on profits.

Yes - because i used to be one, and yet i still had to compete on price with the "only selling it for my uncle / the missus doesnt like it / meet you at tescos / sold as seen" brigade

londonTiger wrote: »

I feel the "they dont pay tax" is the motor traders smear campaign of small time car dealers.

You can feel what you like, but my view is based on actual experience out there in the real world. I could pull 20 adverts off gumtree right now that are motor traders but are advertised as private if you rang them up there'd be some excuse as to why their name isnt on the tax book, so its really a private sale and i'll meet you at Tescos. Do you REALLY believe those people behaving like that are then turning around and paying their taxes? :rotfl:

londonTiger wrote: »

plenty of dodgy traders with large forecourts. I've been to some used car places where they slap on a stupid markup. Like £500 more than the market rate and just cant give you their acceptable figure and you have to go through all the dance of lowballing in and meeting half way.

You struggle with the concept of a "dodgy" trader dont you? Nothing in the above paragraph of yours is illegal?

londonTiger wrote: »

And the usual sales patter..

"I have 3 calls about this car today" - then why are you ringing me to chase me?
"it's got a full service history" - yeah up til 4 years ago.
"It's a good runner" - as in the engine works?

Then walk away. Simples.

EdGasket

I find traders masquerading as private sellers on eBay, AutoTrader, and Gumtree really annoying. You just have to ask how long they have had the car and is it their name and address in the V5. Then when you get the oh I'm just selling it for my brother-in-law or some such nonsense you know to steer well clear. Wastes time though. One chap admitted he was an undeclared trader when I said he should have declared it; just said we're all trying to make a few pounds!