Claiming Business Expenses

GethinPreston

Hi,

I am looking to set up an eBay Business, where fees are charged after selling products on the website. I have heard many people saying that It's possible to claim back eBay and PayPal fees as business expenses on a tax return.

Does my business have to turnover a certain amount before I can complete tax returns?

Thanks in advance

TheCyclingProgrammer

If you're setting up a self employed business then you need to register as self employed as soon as you start trading.

Strictly speaking you don't need to register for self assessment until you have taxable income but registering as self employed will mean HMRC will start asking for a tax return anyway, which you will need to complete.

Keep good records and yes the fees you pay to eBay will be a tax deductible business expense.

densol_2

As above - also can claim

Ebay expenses
Pay pay costs
Cost to buy item
Postage
Packaging
Paper
Printer costs
Some telephone
Broadband ( business proportion)
Some costs of home if store stuff / office use
Travel costs to post office
Travel costs to buy goods to sell

The thing is .... Unless you have unique stuff to sell, the competition drives the prices down, and the fees are ridiculous ! In reality there is little money to be made selling on Ebay

dori2o

GethinPreston wrote: »

Hi,

I am looking to set up an eBay Business, where fees are charged after selling products on the website. I have heard many people saying that It's possible to claim back eBay and PayPal fees as business expenses on a tax return.

Does my business have to turnover a certain amount before I can complete tax returns?

Thanks in advance

The question about expenses is a common query that HMRC get on the phone every day, for both employed and self employed people.

The wording of your question is a concern, and again this is something a lot of people get confused about.

The concept of expenses is that they were costs paid out of your own pocket, which were necessary for you to be able to perform the duties of your job.

What you have to remember is that you do not get back the money you have paid out, you get tax relief on the value of the expenses.

So if you paid out £100 in expenses, then the value of the relief would be £20.

For someone who is self employed like yourself the effect of expenses is that they reduce the amount of your income which is subject to tax.

If you had a turnover of £15,000 and expenses of £2500, then your net profit (taxable income) would be £12500. You would then pay tax (an NI) on everything above the Personal Allowance (Primary threshold for NI)

For an employee of a company where their tax is already paid the situation is similar. The value of any allowable expenses reduces the amount of income that is subject to tax. However, as they have already paid the tax on their incomes (assuming it is above the Personal/tax free Allowance) then these people receive a payment back of the amount of tax relief due.

So (assuming the correct amount of tax has been paid through their wages), if someone made a claim for £100 of expenses and their income was £15,000, then they should be looking to receive a refund of £20.

The common mistake/misunderstanding that happens is that some people believe that they can 'claim back' the cost of their expenses, i.e. if they pay our £100 they are expecting a refund of £100 and not just the tax paid on the £100.

This generally leads to angry/upset people calling HMRC demanding to know why they have not received al of their money back.

So please be aware that you are not claiming back the actual cost of your fees/charges, but claiming the relief from tax on these fees/charges.

Pennywise

Of course, if your income is so low as to not pay any tax anyway (i.e. you have little or no other income either), then it doesn't matter whether the expenses are tax deductible or not - there's no tax to pay anyway, so there'd be no relief. Such expenses merely reduce your taxable profit, so you effectively get relief at your marginal tax rate, if you're paying 29% combined tax and NIC, you get £29 off your tax/NIC bill per £100 spent, but if you're not paying tax/NIC, you get no relief.