Letter From HMRC Re: Ebay Account

ovengloves

My wife's an Ebay Powerseller and has a turnover of around £45K per annum. Margins are really tight though and I'd estimate she makes no more than £5K a year.
This is fine because it enables her to make a small amount from home with little overheads with hours to suit herself.
However, we received a letter from HMRC a couple of days ago saying she may be eligible to pay tax on online trading and asking to contact them within 30 days.
I know you can earn £10k-ish without paying income tax but how can we prove her earnings are so small without employing an accountant which sort of defeats the object?
And why are HMRC targetting an Ebay account? I mean it's not like we're Starbucks or something!

Flyonthewall

Is she registered as self employed and declaring her earnings?

They're targetting her because she's a business. Size is unimportant.

Annisele

Has your wife registered as self employed?

I think it's unlikely you'd need an accountant for those sorts of amounts. There's lots of free advice for sole traders on how to complete accounts, and how to report income to HMRC.

PasturesNew

She won't pay tax on that, but she does need to be registered with HMRC as self-employed/a business.

The figures you need are all in your ebay/paypal account if that's the only place she sells.

You simply fill in an annual tax return that says £5k and there's no tax to be paid.

£45k turnover is a lot of money - with that turnover others might, say, be clearing £25-30k.

TBagpuss

She is effectively running a small business so should be keeping records, which she can use to fill in a tax return.She should be able to keep simplified, cash basis books.

However, as HMRC have siad that she must contact them, that would seem to be the obvious first step.

£5K is low income but if they have noted that she has gross income of £45K it;s not surprising that they have raised the question, After all, they have no way of knowing what proportion of that is profit.

As she is self employed, she has to complete a tax return even if her net income may mean that she is not liable to pay any tax. https://www.gov.uk/self-assessment-tax-returns/who-must-send-a-tax-return

Take a look at the HMRC website

listonosz

I have just had the same letter from the HMRC,I telephoned them yesterday and they wanted to know if I had a business on eBay.
I told them I that I am not a business and I just sell things from time to time.
The woman from the HMRC told me I should be mindful of the tax implications when you sell online.
I have now closed my eBay and paypal account as it is not worth the hassle with all the fees you have to pay and now the HMRC sticking its nose in.
It seems as if they want get rid of people who do this as a hobby.
The tax rules with regard to selling on eBay seem rather complicated and ambiguous to say the least.
If the HMRC wants to tax eBay sellers then the only people allowed to sell on eBay should be sole traders or business's.

Flyonthewall

listonosz wrote: »

I have just had the same letter from the HMRC,I telephoned them yesterday and they wanted to know if I had a business on eBay.
I told them I that I am not a business and I just sell things from time to time.
The woman from the HMRC told me I should be mindful of the tax implications when you sell online.
I have now closed my eBay and paypal account as it is not worth the hassle with all the fees you have to pay and now the HMRC sticking its nose in.
It seems as if they want get rid of people who do this as a hobby.
The tax rules with regard to selling on eBay seem rather complicated and ambiguous to say the least.
If the HMRC wants to tax eBay sellers then the only people allowed to sell on eBay should be sole traders or business's.

HMRC see selling like this: you're either a private seller trying to get rid of your own personal items or you're buying/making items to sell and then it's a business.

If it's a hobby it suggests you're buying items so that you can have the fun of selling. That is a business. You're buying to sell. Doesn't matter if you buy and sell 1 item or 100,000 items and it doesn't matter whether you make a profit or not, if you're buying to sell you need to declare it.

Otherwise it can't really be considered a hobby, you're just clearing out items as when you have no need/want for them anymore, even if you do find it fun when you get to do it.

If HMRC are contacting you it's because you look like you're running a business. You're perhaps selling large volumes and/or selling constantly and/or selling all in the same category.

listonosz

Flyonthewall wrote: »

HMRC see selling like this: you're either a private seller trying to get rid of your own personal items or you're buying/making items to sell and then it's a business.

If it's a hobby it suggests you're buying items so that you can have the fun of selling. That is a business. You're buying to sell. Doesn't matter if you buy and sell 1 item or 100,000 items and it doesn't matter whether you make a profit or not, if you're buying to sell you need to declare it.

Otherwise it can't really be considered a hobby, you're just clearing out items as when you have no need/want for them anymore, even if you do find it fun when you get to do it.

If HMRC are contacting you it's because you look like you're running a business. You're perhaps selling large volumes and/or selling constantly and/or selling all in the same category.

I have collected Gold and Silver coins for many years and I have been selling on and off for the past 5 years or so and I have also sold a lot of unwanted items from my house.
I have often sold a few coins when an unexpected bill has come in.
I think eBay should only be open to registered business's as many people could fall foul of the taxman over trivial amounts of cash.
How long do you have to keep something before you can re-sell it 3 months,6 months,a year?
Maybe the HMRC would raise more tax by looking at the tax affairs of Amazon,eBay and PayPal Etc.

Flyonthewall

listonosz wrote: »

I have collected Gold and Silver coins for many years and I have been selling on and off for the past 5 years or so and I have also sold a lot of unwanted items from my house.
I have often sold a few coins when an unexpected bill has come in.
I think eBay should only be open to registered business's as many people could fall foul of the taxman over trivial amounts of cash.
How long do you have to keep something before you can re-sell it 3 months,6 months,a year?
Maybe the HMRC would raise more tax by looking at the tax affairs of Amazon,eBay and PayPal Etc.

That will probably be why then. Selling a lot in a specific category and, despite being on and off, you have sold a lot. It's also possible that someone that someone contacted HMRC because they've seen you selling a lot of coins.

There is no time limit. If you buy with the intention to sell that makes it a business. If you buy with the intention to keep the item and use it, even if you don't, then that makes it a personal item.

Amazon, ebay and Paypal pay all the tax they need to by law and they do pay a lot.

HMRC go after all those who they think should be paying tax. The tax from all them people who should be paying tax and currently aren't is far more than could ever be made from Amazon, ebay or Paypal.

Marktheshark

a 45 k turnover is hardly selling a few items from home.
I would expect a tax bill for 30% of the 45k unless you can start getting some very good water tight accounts and quickly.

Takeaway_Addict

listonosz wrote: »

I have just had the same letter from the HMRC,I telephoned them yesterday and they wanted to know if I had a business on eBay.
I told them I that I am not a business and I just sell things from time to time.
The woman from the HMRC told me I should be mindful of the tax implications when you sell online.
I have now closed my eBay and paypal account as it is not worth the hassle with all the fees you have to pay and now the HMRC sticking its nose in.
It seems as if they want get rid of people who do this as a hobby.
The tax rules with regard to selling on eBay seem rather complicated and ambiguous to say the least.
If the HMRC wants to tax eBay sellers then the only people allowed to sell on eBay should be sole traders or business's.

So if I run a multi million pound company as a hobby I don't have to pay tax? Nice.