How many of you earn your living off ebay?

soolin

Thank you baffcat for a very useful post.

I have no idea where the idea that selling used or second hand goods is not deemed taxable and i do worry that people might believe these myths and get into problems later with the tax man.

Cam I also just add that users need to declare themselves as trading within 3 months of making their first taxable sale on ebay, if you delay registering past that you will face a fine. Once registered most areas will offer newly registered people a workshop day where they can go to learn about keeping basic account and to learn what is allowable and what is not. However for tax purposes and as it stands at the moment if you turnover less than £15,000 a year the advice you will be given is that you only need the most basic accounts. Ie, total receipts, less total expenses equals taxable profit. Three lines, that is all..although of course you do need all the relevant receipts etc to back it up should you be audited.

StaffsSW

Thats a common problem with big popular forums. Fact and Opinion get confused. One person "thinks" something should happen, another person "believes" that statement is fact.

Which is why there are so many disclaimers dotted around this site!!

Don't believe everything you read. Research "Facts" for yourself, and if you want to take a risk with a taxman, ignorance is no excuse as far as HMRC are concerned.

The tax situation is one reason why a lot ofpowersellers appear to be charging more for goods and postage - doing things by the book costs money, and private sellers may come in and undercut, but it's not sustainable, and when the taxman visits, it's hardly financially successful either.

Remember that VAT registered businesses (those that have revenue of more than £65k) also have to add VAT onto Postage, meaning the P&P is definitly going to cost more than the face value of the stamp.

RoyaleMale

So second hand sellers can get away with not paying tax. All they have to do is pretend everything they purchase with the intent of reselling is actually old junk from their homes. Noone would be any wiser.

Couldn't sellers invent their own admin and labour costs so that their profit margins are incredibly low?

StaffsSW

RoyaleMale wrote: »

So second hand sellers can get away with not paying tax. All they have to do is pretend everything they purchase with the intent of reselling is actually old junk from their homes. Noone would be any wiser.

There is a gulf of a difference between being a second hand seller, and being a private seller. The former is buying to resell, the latter is selling personal effects. Never under estimate the investigative powers of HMRC - if you bought a sofa to resell, they will find out pretty easy. If you have 10 sofas to sell, it'll be pretty obvious whats going on!

Couldn't sellers invent their own admin and labour costs so that their profit margins are incredibly low?

All costs have to be formally documented and receipted, and also fall within certain guidelines and parameters, so certain costs can be added, but not others. I wiped out the bulk of my taxable profit last year by purchasing 2 new laptops as a "business" purchase, and i also allow a sum to be considered as rental for operating my business from the spare room. There are legitimate ways to offset costs and reduce tax liability, so why go down the nefarious route and risk a lot more?

COOLTRIKERCHICK

RoyaleMale wrote: »

So second hand sellers can get away with not paying tax. All they have to do is pretend everything they purchase with the intent of reselling is actually old junk from their homes. Noone would be any wiser.

Couldn't sellers invent their own admin and labour costs so that their profit margins are incredibly low?

in theory i supose you could ...but..and i mean BUT... mr taxman is not stupid they have been around a very long time, and knows all the excuses going.... there is only soo much junk you can hoard... in your house.....

my hobby was collecting certain types of vintage items...... which goes back over 25 years..... with no intention to sell on.... but then i did start selling them, and buying to sell... so hense thats why my hobby is now a business....

the only information i can give is if you are unsure..... about certain areas.... is actually phone your local tax office for advice, and make sure you take their full name for referance...... they are not as scary as people try to make them out to be.. they are human ( well most of them) and are there to help you... they are only a pain or ...to be dreaded if you have not declared truthfully your finacial status.....

powertron

My work colleague made £30 on ebay last month on items he bought to resell. He did not register with the tax office.

If the tax office found out how much would he be fined and how much does he have to pay them?

I currently only sell items in my house that I do not use anymore but I would like to start selling items purchased solely for reselling possibly next year.

shelovestobuystuff

If you sell stuff that was not bought specifically to resell you do not pay VAT.If you buy anything to resell,even if its 2nd hand,you do have to pay VAT.I think,check this on the customs site please,that selling 2nd hand goods as a business is liable for a reduced rate of VAT(its about 7%).
Goods sold for charities have different VAT rules too.
Check your specific circumstances out with the VAT office.

StaffsSW

shelovestobuystuff wrote: »

If you sell stuff that was not bought specifically to resell you do not pay VAT.If you buy anything to resell,even if its 2nd hand,you do have to pay VAT.I think,check this on the customs site please,that selling 2nd hand goods as a business is liable for a reduced rate of VAT(its about 7%).
Goods sold for charities have different VAT rules too.
Check your specific circumstances out with the VAT office.

VAT and income tax are two different things.

If you buy to resell, you have to declare the earnings as taxable income, either under personal or business taxation, depending on how you are registered.

If your revenue is above £65k per year, you must register for VAT, as well as income/business tax.

Secondhand goods would only be susceptible to VAT if your trading revenue is over £65k.

Beyond these details, I leave everything to an accountant, and seek their professional advice. I too listened to hearsay and opinion before deciding to go down the proper channels to establish the facts. I suggest that others do the same before getting to worried, or too complacent, about tax liabilities.

7db

Right - there are some confused posts on tax here. Im not a tax adviser, so you shouldn't take my word as gospel, but here's an overview as I understand it:-

If you are selling some of your own possessions then you are liable for capital gains tax only. This is only if you make a capital gain (ie sell it for more than you bought it for), and you have an allowance of several thousand pounds each year in any case. If you are selling your old stuff, you are unlikely to have a capital gain - but - should you buy something cheap and sell it expensive this is a capital gain. Make more than 8k(? or whatever the allowance is this year) cap gains and you are taxable.

If you are selling as a business venture -- ie buying and selling or selling on commission then you are either:-
- part of a company
- a sole trader / partnership

If you are trading as part of a company then there's all sorts of things going on -- best explained by an accountant (you are paid and pay PAYE, corporation tax is liable on profits).

If you are trading as a sole trader you will need to inform revenue. They'll charge you weekly NI - it's not much. You will then be taxed on profits, net of expenses, as a sole trader. Your time is not an expense, although if you employ someone, that is (and you'll need to pay them using PAYE and pay the tax to the Revenue). Traders aren't subject to capital gains as all of their stock is treated as current inventory, the gain on which is trading profits.

I hope that helps.

7db

PS -- VAT is separate and every much as described in the preceding post.

7db

pgilc1 wrote: »

Call us doom mongerers but would you not agree, as several people have said here already, that for every 1 truly successful business being run on ebay there is probably at least 1000 people that are just making a few £ here and there?

I'm not convinced the ratio is as high as 1000:1 and I'd add that there's nothing really strange about eBay in that respect.

For every business that succeeds there are many many which fail. 2/3 of new companies are liquidated before their third birthday, I think.