Letter From HMRC Re: Ebay Account

listonosz

Takeaway_Addict wrote: »

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

I'm afraid your comment is both unhelpful and facetious.

Flyonthewall

listonosz wrote: »

I'm afraid your comment is both unhelpful and facetious.

Actually there's a point to their comment. Many people make money and consider it a hobby, not a business and so don't declare tax. However, they are businesses and they should be paying tax.

Just because you consider something a hobby does not mean that by law it's not a business. That is why HMRC go after people. A lot of people owe taxes because they're running businesses while claiming "it's just a hobby".

Cornucopia

Marktheshark wrote: »

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.

But that's the kind of negative thing you always say. Not so much completely wrong, more like the worst possible outcome that's missing some critical detail and is still open to challenge. If there was a no scaremongering rule on MSE...

More likely scenario (assuming the OP's OH does nothing) is 30% profit assessment on the £45k turnover, leads to £13,500 assessed income, which with no other income gives £2,900 taxable income. That's a final tax bill of £580. If the OP's OH's profit is actually in the £5k region, that doesn't sound too bad. (Obviously not as good as £0, which they could probably still get if they act now, assuming we are talking about the 2014/5 tax year).

I sell a bit on eBay, but nowhere near the scale of the OP's OH. I simply put the profit in a box on my tax return, with a note in the notes box that it is for eBay transactions. Job done.

There will probably be a small overhead of keeping a spreadsheet of transactions, especially if the postage and purchase cost varies between them. If the postage/purchase cost is consistent, then you may not even need a spreadsheet, because eBay/Paypal will give you all the info you need to make a reasonable calculation for profit. Alternatively, run all the income and all the expenses through a dedicated bank account, and similarly, it will be easy to crank the figures at the end of the year.

I'm inclined to agree that HMRC ought to set some practical lower limits on where its interest will start: this could be £1000 sales per year, 500 sales per year or £500 profit per year - certainly in that region, I would have thought. Either way, £45k turnover is a business, no doubt about that.

Takeaway_Addict

listonosz wrote: »

I'm afraid your comment is both unhelpful and facetious.

Is it though? I'm sure Alan Sugar works for a hobby now, its hardly like he needs the money so should he pay tax???

patman99

Don't forget that the op's spouse can reduce that £5k even further by claiming part of the electricity bill, broadband/phone and council tax as business expenditure.

I thouth she would have had the sense to register as a sole trader and submit a self-assessment each year just to take advantage of any Tax breaks and grants available.

listonosz

If the HMRC wants to be more efficient in collecting tax from private online sellers they should implement yearly limits of what you can sell.
Also out of the coins I have sold from my collection were U.K coins which are CGT exempt, many items are treated differently with regard to tax.
I now collect wristwatches and I believe you don't pay tax on re-sale as they are classed as a depreciating asset.
Now if I have to pay tax on what I have sold I will do so, as ignorance of the law is no defence.
I know it is unfair on people who operate as legitimate business's online who are disadvantaged by being undercut by people who don't pay tax.
Ebay,and various other online platforms are more than happy to keep taking fees off sellers knowing full well that tax rules may have been flouted.

listonosz

Takeaway_Addict wrote: »

Is it though? I'm sure Alan Sugar works for a hobby now, its hardly like he needs the money so should he pay tax???

Thank you,another thought provoking and insightful comment.

Flyonthewall

listonosz wrote: »

If the HMRC wants to be more efficient in collecting tax from private online sellers they should implement yearly limits of what you can sell.

HMRC do not collect tax from private sellers. Only people who are actually running businesses even if they have a private ebay sellers account.

That would be impossible to implement anyway and in no way fair.

Also out of the coins I have sold from my collection were U.K coins which are CGT exempt, many items are treated differently with regard to tax.
I now collect wristwatches and I believe you don't pay tax on re-sale as they are classed as a depreciating asset.
Now if I have to pay tax on what I have sold I will do so, as ignorance of the law is no defence.

You're selling personal items, therefore you are a private seller and shouldn't be paying tax on them.

I know it is unfair on people who operate as a legitimate business's online who are disadvantaged by being undercut by people who don't pay tax.

Good thing HMRC look into sellers who they are running businesses and not declaring it then isn't it.

Ebay,and various other online platforms are more than happy to keep taking fees off sellers knowing full well that tax rules may have been flouted.

They're happy to take fees because that's how they make money. They're paying as much tax as they are required to by law. If you feel they should be paying more then the rules on tax are to blame, not the companies. If you had to pay loads and loads in tax and were paying the amount required would you choose to pay more when you didn't have to?

antrobus

ovengloves wrote: »

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.

Good to see that the HMRC campaign is actually bearing some fruit.:)

http://www.telegraph.co.uk/finance/personalfinance/household-bills/11632478/HMRC-targets-Etsy-eBay-and-Gumtree-sellers-but-when-is-your-hobby-taxable.html

ovengloves wrote: »

...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?...

You don't have to "prove" anything normally. HMRC simply accepts the figures that are submitted. That's why it's called self assessment. Of course, in your wife's case, they may well be asking some questions.

ovengloves wrote: »

...And why are HMRC targetting an Ebay account? I mean it's not like we're Starbucks or something!

Because it relates to someone running a business who has failed to register for self assessment. HMRC don't know that your wife is 'only' making £5k a year, because she hasn't bothered to tell them anything at all.

And besides, at least Starbucks has the decency to fill in some returns now and again, and isn't trying to hide.

listonosz

Flyonthewall wrote: »

HMRC do not collect tax from private sellers. Only people who are actually running businesses even if they have a private ebay sellers account.

That would be impossible to implement anyway and in no way fair.



You're selling personal items, therefore you are a private seller and shouldn't be paying tax on them.



Good thing HMRC look into sellers who they are running businesses and not declaring it then isn't it.



They're happy to take fees because that's how they make money. They're paying as much tax as they are required to by law. If you feel they should be paying more then the rules on tax are to blame, not the companies. If you had to pay loads and loads in tax and were paying the amount required would you choose to pay more when you didn't have to?

I don't disagree with many of your comments.
I just think that eBay Etc has a responsibility to make sellers more aware that they could be flouting tax rules.
Selling limits can be easily implemented if they choose to do this.
Ebay routinely break the law every day by allowing counterfeit coins to be sold on their site,even when this is pointed out to them they do nothing about it.
But they are a huge corporation so the law does not apply to them.