Ebay and taxes (HMRC)

Jeremy535897

soolin said:

Jeremy535897 said:

HMRC do look at some vendors on Ebay who list themselves as businesses to see whether they are declaring profits from a trade. Ebay don't send anything to HMRC as far as I am aware (although vendors do get scam emails from people purporting to be HMRC employees who claim to have received information from Ebay). There was a high profile evasion case, but the sales were in the millions. I would be amazed if HMRC looked into a private vendor making the occasional sale of some old computer games. 

I do prefer to link to something official, but it’s late so will link to a discussion instead

https://www.thisismoney.co.uk/money/news/article-4107122/How-taxman-spies-buy-sell-online-thanks-new-law-hardly-noticed.html

ebay do declare to HMRC when approached , it’s not routine but you would be surprised how many people get HMRC letters asking them to ‘reconsider’ their tax returns to ensure they haven’t overlooked online retail trading. 

As I said earlier I did voluntary work, virtually every person I spoke to had been reported to either DWP by friends or relatives, or to HMRC officially for not declaring online trading. We are talking several people a week from a very small locality . 

From your link, as I said, they aren't looking at people who sell the odd old computer game. Nor, as you point out, do Ebay tell HMRC about everyone who opens an account. They do have the power to ask Ebay for details about accounts that raise their suspicions:

"Experts say the taxman is looking for internet sellers who make regular profits or run successful businesses, rather than part-time hobbyists.

But the crackdown will still concern those who sell second-hand furniture or handmade crafts, who may be snooped on even though they owe no tax at all.

Bill Dodwell, of accountancy Deloitte, says: 'Lots of the data will be for perfectly honest, straightforward transactions. But, in the middle of it, HMRC may find evidence of tax evasion.

'However, it will not be going after the small-time sellers, such as someone getting rid of an iPhone on eBay. It's looking for patterns. 

'For example, if you are selling dozens every month, that would suggest you are running a business.' "

The badges of trade are a good guide.

soolin

Jeremy535897 said:

soolin said:

Jeremy535897 said:

HMRC do look at some vendors on Ebay who list themselves as businesses to see whether they are declaring profits from a trade. Ebay don't send anything to HMRC as far as I am aware (although vendors do get scam emails from people purporting to be HMRC employees who claim to have received information from Ebay). There was a high profile evasion case, but the sales were in the millions. I would be amazed if HMRC looked into a private vendor making the occasional sale of some old computer games. 

I do prefer to link to something official, but it’s late so will link to a discussion instead

https://www.thisismoney.co.uk/money/news/article-4107122/How-taxman-spies-buy-sell-online-thanks-new-law-hardly-noticed.html

ebay do declare to HMRC when approached , it’s not routine but you would be surprised how many people get HMRC letters asking them to ‘reconsider’ their tax returns to ensure they haven’t overlooked online retail trading. 

As I said earlier I did voluntary work, virtually every person I spoke to had been reported to either DWP by friends or relatives, or to HMRC officially for not declaring online trading. We are talking several people a week from a very small locality . 

From your link, as I said, they aren't looking at people who sell the odd old computer game. Nor, as you point out, do Ebay tell HMRC about everyone who opens an account. They do have the power to ask Ebay for details about accounts that raise their suspicions:

"Experts say the taxman is looking for internet sellers who make regular profits or run successful businesses, rather than part-time hobbyists.

But the crackdown will still concern those who sell second-hand furniture or handmade crafts, who may be snooped on even though they owe no tax at all.

Bill Dodwell, of accountancy Deloitte, says: 'Lots of the data will be for perfectly honest, straightforward transactions. But, in the middle of it, HMRC may find evidence of tax evasion.

'However, it will not be going after the small-time sellers, such as someone getting rid of an iPhone on eBay. It's looking for patterns. 

'For example, if you are selling dozens every month, that would suggest you are running a business.' "

The badges of trade are a good guide.

I do not think this statement from the OP 'I have 'received' about £4,000' implies merely a handful of computer games. your own quote from the article says 'For example, if you are selling dozens every month, that would suggest you are running a business'. Obviously that in no way implies OP 'is' running a business, just that the selling pattern could fit that of a small sole trader and therefore be worthy of a question or two. 

I have no idea how much second hand games go for so may well be wrong, but £4000 in potentially less than a year seems like a lot of games and certainly enough to possibly attract the attention of HMRC .

Slightly off topic, this bit is also interesting from that article 'But the crackdown will still concern those who sell second-hand furniture or handmade crafts, who may be snooped on even though they owe no tax at all.'
Dealers of second hand furniture or handmade goods would be a business but possibly fall under the £1000 reporting limit- but I can see many small sellers grabbing onto that statement and believing it to mean something else. However that is off topic and merely a statement I find interesting . I do deal in second hand goods as part of my miniscule little business and am always surprised how many other dealers, or well meaning friends tell me I shouldn't be reporting my income as you can't be a proper business if you don't sell new items! 

TBSC5000

Thankyou for the responses everybody - really useful.
Just as an aside, if the HMRC did get in touch with me about it, is the process then me hacing to prove that I was not making a substantial profit, or indeed seeking to do so?.

If they did declare me as trading, what would I then be subject to paying tax on, the whole lot?, or could I argue that x% of it was personal effects or of no profit? - Aware that might be a tricky question.

Jeremy535897

You are quite right that selling second hand items can be just as much a trade as selling new goods, otherwise antique shops and second hand car dealers would never pay any tax (although in my experience lots don't). There is a whole VAT scheme aimed at such trading.

OP said at the start that "I have been selling some of my old consoles/games". I may be misinterpreting this, but it seems to me that there is no evidence of any intention to trade here. If I get given a Dinky toy for my 5th birthday, look after it, and then find out twenty years later that it is an incredibly rare model worth £5,000, and so I sell it, I am not trading. I have assumed OP bought his games and consoles to play, not to profit, and is buying such items now in a bundle and selling back what he never wanted. There is no profit motive anywhere that I can see. I suppose that if you have kept old receipts showing you bought these items for more than the eventual sale price, you have a complete defence, but when there is so much fertile ground for HMRC to investigate, they would be misdirecting resources if they investigated sellers without Ebay shops or business Ebay accounts who sold a few old things for modest sums without any discernible pattern.

nick74

TBSC5000 said:

Thankyou for the responses everybody - really useful.
Just as an aside, if the HMRC did get in touch with me about it, is the process then me hacing to prove that I was not making a substantial profit, or indeed seeking to do so?.

If they did declare me as trading, what would I then be subject to paying tax on, the whole lot?, or could I argue that x% of it was personal effects or of no profit? - Aware that might be a tricky question.

Two questions: Do you buy and sell items with the intention of making a profit? and Do you actually make a profit over all? 
Its not the case that simply buying and selling lots of stuff automatically makes you a trader. In reality the last thing HMRC want is people registering loss-making 'hobby businesses', then using the loss to offset against income from their 'day jobs'!

soolin

TBSC5000 said:

Thankyou for the responses everybody - really useful.
Just as an aside, if the HMRC did get in touch with me about it, is the process then me hacing to prove that I was not making a substantial profit, or indeed seeking to do so?.

If they did declare me as trading, what would I then be subject to paying tax on, the whole lot?, or could I argue that x% of it was personal effects or of no profit? - Aware that might be a tricky question.

If HMRC did raise an estimated tax bill on the basis that you were trading you could first try and prove you were not- and that's why I suggested earlier that you keep proof of purchases so you can show, for example, that you paid £100 for 10 games, kept 2 and sold the remaining 8 as unwanted - for £50. 

If that argument did not work then you would be expected to prepare accounts at the appropriate time, and that is basically all the money you have taken including postage, but less all outgoings, so postage and packing would be deducted, the original cost of items etc would all be deducted - plus any costs for example, getting the discs in a better shape for resale. any items you keep could be apportioned a cost- and added back- so that would actually increase your profit. (back of an envelope explanation  - Buy 10 for £100, keep 2 so say £20 which leaves £80 as an allowable expense rather than the full £100). You would only then pay tax on the actual 'profit' after all expenses .

soolin

Jeremy535897 said:

You are quite right that selling second hand items can be just as much a trade as selling new goods, otherwise antique shops and second hand car dealers would never pay any tax (although in my experience lots don't). There is a whole VAT scheme aimed at such trading.

OP said at the start that "I have been selling some of my old consoles/games". I may be misinterpreting this, but it seems to me that there is no evidence of any intention to trade here. If I get given a Dinky toy for my 5th birthday, look after it, and then find out twenty years later that it is an incredibly rare model worth £5,000, and so I sell it, I am not trading. I have assumed OP bought his games and consoles to play, not to profit, and is buying such items now in a bundle and selling back what he never wanted. There is no profit motive anywhere that I can see. I suppose that if you have kept old receipts showing you bought these items for more than the eventual sale price, you have a complete defence, but when there is so much fertile ground for HMRC to investigate, they would be misdirecting resources if they investigated sellers without Ebay shops or business Ebay accounts who sold a few old things for modest sums without any discernible pattern.

Again from the original post ' I have also been buying some games/console bundles (not from ebay), taking out the items that I need for my collection and then selling the rest back on ebay (not for profit).', these are not historically owned items - and that's where I think any issue might arise as that begins to fit the pattern of a dealer in the eyes of HMRC.

TBSC5000

I've just done the (reasonably) painful task of working out the 'profit' I made over the course of the last year by selling this stuff. I had to estimate what I paid for some of it as some of the games/items were 20 years old!, but my profit was approximately £217. I also sold quite a few items at a loss. 

I didn't take into account anything I've kept from bundles, I literally just said ' I paid approx 'x' and sold the excess for approx 'y'' and noted the delta as profit/loss

So this question is obviously one for which I do not consider a response 'official advice', but should I just inform HMRC of the activity and share my calculations with them? (hoping they agree its just hobbyist), or should I just sit on my hands and see if they say anything?

TBSC5000

Also -  is it possible to email HMRC? ... I don't much care for trying to explain this over the phone. and would rather have a paper trail

Jeremy535897

You can't be trading in goods you bought, without any thought of selling them, 20 years ago. If you want a console for private use that is sold as part of a job lot, and you sell the unwanted items, you are not trading, because if you could have bought the console without all the other stuff, that is what you would have done. By all means keep the workings you have, but read the badges of trade:
https://www.gov.uk/hmrc-internal-manuals/business-income-manual/bim20205

From what you have said, you fail the first eight tests. Why would you bother HMRC, who will be most unlikely to give you the right answer?