Ebay business account and tax

catoutthebag

Hi, so I'm basically a bit worried about where I stand.

I've been a sole trader for my day job since 2008.

I've used ebsy since 2003 selling the odd personal items and buying. A few years back,there was some issue with my private account which meant me having to upgrade to a business account. Over the recent period of a few years, I've generally sold larger value items (personal), not daily, not numerous, but more weekly or monthly.

I haven't mentioned this to HMRC as a) people don't b) they ate personal items and I am both buying and selling personal items and not as a 'business', as was in effect forced to change account a few years back.

There will be many users using a business account in effect as a personal seller or buyer

'Having realised all this, I have contacted ebsy to check if I can downgrade, they are reviewing but said it should be fine.

Where would I stand with HMRC and all this if they investigate? My returns are correct and paid and filed on time for my 9-5 day job.

Would I get some huge back dated 5 year return? How can they trace all items to work out profits? I can't even remember what I paid? How can they prove something is not a personal item?

Thank you for your time

Pennywise

As long as you've only been selling surplus private stuff you'll be fine. Regardless of what type of ebay account you have, it's usually fairly obvious whether someone's selling their own stuff or is trading.

Red flags are:-

1. Selling proportionally high volumes of "new" stuff as opposed to used.
2. Selling more than one of the exact same item.

If you are contacted by HMRC if you're only selling personal stuff, it should be fairly quick and simple to persuade them.

Bluebirdman_of_Alcathays

If what you've said is truthful and you're selling personal stuff - you should have no problem. It is generally pretty straightforward to establish if you're trading - but the article below will give you much more info!


http://www.accaglobal.com/uk/en/technical-activities/technical-resources-search/2011/august/badges-of-trade.html

catoutthebag

Yes, I've just checked the '9 points' system to determine if I am a business and don't feel I qualify.

Most of the time, and initially, it was old clothes and bric a brac etc

I have 700 feedback over 13 years as a personal and then business seller, so surely way too low in turnover of items.

My items are not usually specific.

Though as my hobbies changed the last couple years, I did buy a dozen items or so as new, which were intended as personal use, but I changed my mind and ended up making money from it. Though not sure how that would be viewed, as I'm profiteering very occasionally and more recently, but they need to determine it was unintended?

catoutthebag

More recently, I bought multiple items of one product to sell for profit.

However,

They were low value, under £100
Only a handful were purchased
Only done it with this one item (ie bought multiple)

Again, as I use this as a personal account, how can they determine or track down anything they consider to be profit amongst all the transactions, and prove this to be the case?

Surely they don't investigate innocent individual for peanuts

Bluebirdman_of_Alcathays

catoutthebag wrote: »

More recently, I bought multiple items of one product to sell for profit.

However,

They were low value, under £100
Only a handful were purchased
Only done it with this one item (ie bought multiple)

Again, as I use this as a personal account, how can they determine or track down anything they consider to be profit amongst all the transactions, and prove this to be the case?

Surely they don't investigate innocent individual for peanuts

Well, then you should declare the profit you made on those items mentioned above, and ignore the rest. Tax in this country is done on the basis of self-assessment. The onus is on you to tell the truth, and on you to get it right first time.

catoutthebag

As I say, most items are used and sold at a loss compared to purchase price.

A tiny proportion 5% are personal items that have unintentionally sold at profit after I changed my mind about keeping them.

So
Do these profit get taxed at 20% included in personal allowance? And where are they declared on the return

soolin

catoutthebag wrote: »

More recently, I bought multiple items of one product to sell for profit.

However,

They were low value, under £100
Only a handful were purchased
Only done it with this one item (ie bought multiple)

Again, as I use this as a personal account, how can they determine or track down anything they consider to be profit amongst all the transactions, and prove this to be the case?

Surely they don't investigate innocent individual for peanuts

Then you fulfil the definition of a business, amounts don't matter, but buying to resell does. You can however have 2 accounts, your business one and a private one, however if ebay consider that you were a business previously and you use a new private account to continue selling those same items, then you risk losing all your accounts.

Second hand clothing is a usual trigger for ebay as it is the most common small business for people trying to make cash in hand. Listing, for instance, several different sizes over a period of time will almost always get a buyer flagged as a business.

Oh, and yes HMRC do investigate- they may take years but they do catch a lot of people. They don't need to prove anything, they raise taxes on what they believe has been defrauded and expect the consumer to prove why tax is not payable. They set the bar very high for tax owed, and then the consumer will be invited to provide accounts to show the actual amount due- or prove items were personal .

Bluebirdman_of_Alcathays

catoutthebag wrote: »

As I say, most items are used and sold at a loss compared to purchase price.

A tiny proportion 5% are personal items that have unintentionally sold at profit after I changed my mind about keeping them.

So
Do these profit get taxed at 20% included in personal allowance? And where are they declared on the return

I'm confused - above you said that some items were bought with the express intention of selling for a profit. Those items would undoubtedly be classed as trading, and the turnover, expenses and all other details simply goes into your income from self employment that is appended to the main tax return (paper) or pops up if you do it online.

catoutthebag

soolin wrote: »

Then you fulfil the definition of a business, amounts don't matter, but buying to resell does. You can however have 2 accounts, your business one and a private one, however if ebay consider that you were a business previously and you use a new private account to continue selling those same items, then you risk losing all your accounts.

Second hand clothing is a usual trigger for ebay as it is the most common small business for people trying to make cash in hand. Listing, for instance, several different sizes over a period of time will almost always get a buyer flagged as a business.

Oh, and yes HMRC do investigate- they may take years but they do catch a lot of people. They don't need to prove anything, they raise taxes on what they believe has been defrauded and expect the consumer to prove why tax is not payable. They set the bar very high for tax owed, and then the consumer will be invited to provide accounts to show the actual amount due- or prove items were personal .

Assumption being made, not uncommon on these forums.

The clothing I sold was MY own, in the same size, not multiple sized Barnados stock.

Secondly, I've not bought to resell on any occasion, apart from one described above where multiple were bought. I can concede tax on that, but YOU need to prove otherwise for anything else.

Thirdly, 4 items a month (bought AND sold, for personal consumption), over 13 years does NOT constitute someone operating a business

Fourthly, HMRC would need to prove sale price in order to generate any accurate bill.

Fifthly, I possibly temporarily confirmed one of the business points/standards out of 9.

Sounds like you work for hnrc?

I saw an article where someone has 7000 transaction and got caught as they were operating a fully fledged business and owed £300k. That's a business, mine isn't unless you count selling my old shirt, or my old tele, or my old rug etc

Thrugelmir

catoutthebag wrote: »

Where would I stand with HMRC and all this if they investigate? My returns are correct and paid and filed on time for my 9-5 day job.

Better have some information to hand should the HMRC come knocking. Technology is making it very easy to connect an individuals personal affairs.