Law and Ebay selling

julie777

I need clarification from civil and helpful individuals like yourselves rather than from the troll on the Ebay forum.

My hobby has gradually turned into a very small effort to make some profit. I now make around £1000 profit pa from buying cheap items and selling them on ebay for more.

HMRC is fully aware and I declare every penny.
But now another Ebay member is telling me I MUST take an Ebay Business account. Something about Consumer Contract Regulations.

This would effectively double the fees I have to pay them as at present I get free listing days as a private seller.

I found the following quote on an official Ebay page:
"If you're a very high volume seller, eBay requires you register as a business account. You'll receive an alert from eBay if we think you should upgrade your account to a business account."

To me this implies Ebay is not too bothered - they have not contacted me. Probably yearly sales of around £2200 is not considered to be "very high volume".

But I am hoping Martin or one of the moderators can please tell me where I stand re relevant laws. Is there a law which says I MUST have a business account?

I did a search but could not find this info.

Thanks in advance. Julie.

Cornucopia

There are three separate considerations, each of which has its own "rules".

1. Anyone selling for profit must declare their profit to HMRC and pay whatever income tax is due.

2. Any online business seller must observe the distance selling requirements for returns. This is slightly problematic because eBay does not require private sellers to offer no fault returns, even though they may be liable to provide them. The selection of the eBay "no returns" tick-box does not prevent a buyer from seeking returns, as the ebay selection does not affect the underlying legal liability. It's apparently illegal to present your sales with incorrect or misleading information about buyers' rights, although how this works with info published by eBay, who knows.

3. eBay may have contractual requirements for who is a private seller and who is a business seller. These don't directly connect to 1 or 2, and there is no law requiring business registration on eBay. HMRC may look more closely at ebay business accounts (or maybe not).

Some people online do not understand that these are 3 separate things, and tend to try to bundle them all together.

mjm3346

The consumer has a right to know they are dealing with a business and not a private seller and you might need to comply with the appropriate rules for businesses about the sale of goods act/distance selling regulations.

Cornucopia

julie777 wrote: »

But I am hoping Martin or one of the moderators can please tell me where I stand re relevant laws. Is there a law which says I MUST have a business account?

Just noticed this from your opening post. It's highly unlikely that anyone from MSE will offer you advice, directly - it's just not what we do here.

Some Board Guides and Board Regulars will do their best to offer what I would call "best endeavours opinion", which is typically based on a combination of their personal experience and official references. (Though not all BGs have particular knowledge about the boards they look after).

That's the basis of my post #2, above. If it's something that really bothers you, then to get to a definitive answer you will either need to speak to eBay, and ask them the question directly, or get advice from an Accountant or Solicitor.

julie777

Thanks for all the shared information.
Inspired by MoneySavingExpert.com I want to save money on my fees of course! Or at least prevent them going up.
I think will make some amendments re return policy and making buyers aware I am a trader.
HMRC already get my accounts as I have been self employed in direct selling for many years before (due to illness) I began selling things online as a hobby with benefits.

Wizzbang

julie777 wrote: »

I need clarification from civil and helpful individuals like yourselves rather than from the troll on the Ebay forum.

My hobby has gradually turned into a very small effort to make some profit. I now make around £1000 profit pa from buying cheap items and selling them on ebay for more.

HMRC is fully aware and I declare every penny.
But now another Ebay member is telling me I MUST take an Ebay Business account. Something about Consumer Contract Regulations.

This would effectively double the fees I have to pay them as at present I get free listing days as a private seller.

I found the following quote on an official Ebay page:
"If you're a very high volume seller, eBay requires you register as a business account. You'll receive an alert from eBay if we think you should upgrade your account to a business account."

To me this implies Ebay is not too bothered - they have not contacted me. Probably yearly sales of around £2200 is not considered to be "very high volume".

But I am hoping Martin or one of the moderators can please tell me where I stand re relevant laws. Is there a law which says I MUST have a business account?

I did a search but could not find this info.

Thanks in advance. Julie.

I think you already know the answer, or you wouldn't be coming here trying to clear your conscience. eBay asks you to comply with the law and open a business account, they can't force you. In the same way the tax man asks you to register your business within a set time period, but they can't force you. Speed limits are displayed on roads and are the law, but humans have free will. However all can penalise you later, in many ways when they catch up with you and rightly so. Anyone who is turning a regular profit has a right to be charged higher fees etc - it will be your responsibility to adjust your prices or otherwise factor in what it costs to comply with the law.

You also need to look at what other regulations you should legally be complying with - for example, if you hold data on customers, then you are legally obliged to pay a fee and register with the data commissioner. On 25 May 2018 most processing of personal data by organisations will have to comply with the General Data Protection Regulation also. https://ico.org.uk/for-organisations/business/

A quick internet search turns up this major law and accountancy firm who say:

“Few people consider the tax implications of selling items through eBay and Amazon, Gumtree and Etsy, and may think it is just a hobby,” said Dawn Register, a tax specialist at BDO.

They then go on to list these criteria which surely form a legal precedent, not only for the tax man.

When is a hobby actually a business?
You might think that selling second-hand items and crafts online is a hobby, but the taxman will class you as a business if it can prove you are doing “anything in the nature of trade”.

If you collect items and resell them in a short period of time, or sell home-made crafts online, you could be classed as a business.

There are several traits that mark you out as a business in the eyes of the taxman, known as the “badges of trade”, listed below. Just one of these could be enough to show that you are trading. Profit is the trigger to get the taxman interested in you in the first place.

The nine ‘badges of trade’
1) Is your primary motive to earn a profit? If HMRC thinks you intended to make money, rather than selling items for fun, your selling activity is considered to be a business.

2) The number of transactions matter. If you repeat very similar transactions in a short period of time, this might be considered a badge of trade.

3)What type and quantity of goods are you selling? Are you buying so many that you profit from an economy of scale? Did they yield an income while they were in your possession? To demonstrate that your selling activity is a hobby, you may need to prove the goods gave you “pride of possession”, for example, a picture for personal enjoyment.

4) If your online transactions are similar to an existing type of business, such as a clothing retailer or specialist collectables seller, this may be used by HMRC as evidence that you are trading.

5) If you modify items before selling them, again this is a badge of trade. Ask yourself: do you repair, alter or improve items to make them more saleable and, therefore, achieve a greater profit?

6) How did you carry out the sale? If you sold an item in the same way as a shop or auction house – where customers agree to buy something at a fixed price – you could be classed as a business. This is known as an “undisputed trade”.

7) If you borrowed money to buy an item, especially if this loan could be repaid only by selling the items again, this is evidence of trade.

8) The period of time between when you bought the item and sold it again will be looked at by HMRC. Any assets that are the subject of trade will normally, but not always, be sold quickly. This suggests that you only bought an item with the intention of selling it. By contrast, an asset that you bought with the intention of owning it, but then decided to sell after a period of time is much less likely to be suspect.

9) How did you acquire the item? If you received something as a gift, or an inheritance, you’re far less likely to be seen to be running a business when you go on to sell.

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

Cornucopia

Wizzbang wrote: »

... eBay asks you to comply with the law and open a business account, they can't force you. In the same way the tax man...

They aren't "in the same way", though, and that is at the heart of the OP's question, I think. Complying with the law and opening a business account are not necessarily the same thing.

eBay's rules and requirements are contractual - if you don't honour your side of the contract, they can cancel the contract. Liability to HMRC tends to be criminal in nature. They are not the same thing at all.

A quick internet search turns up this major law and accountancy firm who say:

!!!8220;Few people consider the tax implications of selling items through eBay and Amazon, Gumtree and Etsy, and may think it is just a hobby,!!!8221; said Dawn Register, a tax specialist at BDO.

The OP said at the outset that HMRC were fully informed.

They then go on to list these criteria which surely form a legal precedent, not only for the tax man.

No they don't form precedent (only Courts make precedent), and eBay wouldn't be bound by such precedent even if it was (because their agreement with you is contractual in nature).

None of what follows is particularly helpful, since the OP has already said that HMRC have been informed.


Personally, I think the OP has it right when she says that eBay are somewhat ambivalent about Business Registration. You can see why that might be. The only mandatory requirements that I can see are to inform HMRC of profits made from trading, and to follow the legal obligation to ensure that buyers know who they are buying from and have the opportunity for the no-fault return of unwanted items at their own cost.

julie777

Personally, I think the OP has it right when she says that eBay are somewhat ambivalent about Business Registration. You can see why that might be. The only mandatory requirements that I can see are to inform HMRC of profits made from trading, and to follow the legal obligation to ensure that buyers know who they are buying from and have the opportunity for the no-fault return of unwanted items at their own cost.[/QUOTE]

In what way would one "ensure that buyers know who they are buying from" please?

Cornucopia

julie777 wrote: »

In what way would one "ensure that buyers know who they are buying from" please?

That's a good question, and one that I do not have an immediate answer to. I suspect that a Court would need to decide what was appropriate in the context of a marketplace like eBay.

This is the Governent info on the matter: https://www.gov.uk/online-and-distance-selling-for-businesses

There is an exemption for many of the requirements where goods cost less than £42, which will cover many eBay sellers.

julie777

What I have found out so far:-
The only relevant law I can find on gov.uk is about ONLINE and
DISTANCE selling regulations.
They seem to say that if you buy to sell
you must make sure your customers know you are a business or sole trader. You must state immediate payment is required, that they have a 14 day right to cancel the order. Also have to give full address.

(Still unclear if this all applies to goods under £42 as they have not answered my question)

This does not require an EBAY Business account as you can add the info to the description box.

On the webchat I was told Ebay don't mind me having a private account unless I sell a quantity of one item which I don't. Also they will contact me if at any time they think I need a business account and even then I can discuss the matter with them.

Tallaght

The HMRC work very closely with ebay.