eBay Private Seller - Self Assessment Tax Return??

se2020

Bertie129 said:

vacheron said:

RFW said:

.....

On the first bit about the bike, whether you set out to make a profit is irrelevant. It's whether you always intended to sell some of the bike when you purchased it that would make you a trader. Of course noone would know if you bought it all for spares and then later realised you could sell some of it unless you said so.

Is this really how HMRC would define a trader?

Being an avid eBayer, everything of any significant value I buy for my own use I will "intend to sell" when I no longer need it... Kids toys, pushchairs, old furniture, bicycles, cars, electrical appliances.

I may not be intending to sell it the second I purchase it, but I certainly would intend to sell it when it is no longer needed as I have no desire to thow things with inherent value into landfill !

By your definition, If someone has a baby and buys a Silvercross pram for £2000 with the intention of selling it when he baby grows up, should they then sell it for over £1000, they will be considered a "trader" and expected to fill in a tax return? 

I've wondered about this myself, as I do the same with almost anything I buy to use, I keep the boxes in the loft and then sell things on second hand when I'm done with them. It's just being a savvy shopper. Baby equipment is a good example, I buy it intending to sell it when the baby grows up. Bikes, computer equipment, phones too.

Since I bought it intending to sell it I could, in theory, declare the difference between the price I paid and the price I sold it for as a trading loss in order to reduce my tax bill. I'm sure that's against the spirit of the law but I'd be interested to hear whether it's actually not allowed. Perhaps if you've personally used it, it's not trading, even if you always intended to sell it? What legislation prevents you doing this?

If you buy it intending to sell it for a profit (ie. you are trading) but actually make a loss then, yes, you can claim a trading loss.

If you buy a pram with a rrp of £2500 in a sale for £2000 you might well intend to sell it for £2200..
You put a baby in it for a year, baby outgrows it, you sell it for £1000, you make a £1000 loss that you can offset against other trading profits.

Downside, well, you have received a 'benefit in kind' from your trading business in the personal use of the pram. 
How much benefit? 
You would struggle to argue it was not £1000, ie. The difference in value of the pram from when you started using it until the business re-sold it at a lower value.
So you then owe tax on the £1000 benefit.
So basically gain nothing aside from giving yourself more paperwork and potentially worst off if the £1k pushes you into a higher tax bracket etc.

NorthYorkie

se2020 said "If you buy a pram with a rrp of £2500 in a sale for £2000 you might well intend to sell it for £2200..
You put a baby in it for a year, baby outgrows it, you sell it for £1000, you make a £1000 loss that you can offset against other trading profits."

As the pram was being used for private purposes, it would not be part of the trading stock. Only when the decision was taken to actually sell it, would it have been treated as being appropriated to trading stock at its market value at that time (presumably £1,000?). Therefore no loss.

RFW

NorthYorkie said:

se2020 said "If you buy a pram with a rrp of £2500 in a sale for £2000 you might well intend to sell it for £2200..
You put a baby in it for a year, baby outgrows it, you sell it for £1000, you make a £1000 loss that you can offset against other trading profits."

As the pram was being used for private purposes, it would not be part of the trading stock. Only when the decision was taken to actually sell it, would it have been treated as being appropriated to trading stock at its market value at that time (presumably £1,000?). Therefore no loss.

If you've used a pram for a year then whether you'd intended to sell it at the outset is irrelevant as a year later it is a second hand pram. On the other hand if you buy a painting with the intention to sell it and hang it on your wall for 12 months then it's more of a business decision when it comes to sell it. From what I know, which ain't that much, the latter is a fairly standard tax dodge in the art and antique world.
There'll be some grey areas and some people getting away with not paying bits of taxes here and there but the law is generally there to stop people taking the mick.

SteveSam

Like many on this forum I am a little concerned about the grey area around how HMRC will distinguish between items bought with the intention of trading and personal items originally purchased for joy of ownership or as part of building an evolving collection.
I have been collecting vintage cameras, watches, glass and ceramics for over 20 years and I have many high value items sold each year that easily exceed the £1000 threshold.
Items that have been in my possession for a long time are clearly personal but where there is no proof of purchase for example purchased for cash at fleamarkets etc what then?
Items bought as part of a lot at auction. How are you to attribute values to each item within the lot even when you have proof of purchase of the total lot?
Timescale: An item bought and sold within 12 months could easily be interpreted as trading but may not be. Example: Maude buys an expensive coffee machine in January for £250. By June she is fed up having to clean it and sells it on Ebay for £125. If this takes her over her £1000 threshold and she has sold more than 30 items it will be reported to Ebay and that £125 could attract tax.
The other concern is where auction lots are bought for only one or two items within the lot to add to a collection or for further research purposes. The balance of the lot will be sold immediately as surplus. Is this trading even though not bought with the intention of making a profit. I can think of other examples but will leave it there.

DullGreyGuy

If you were comfortable you weren't trading before the changes you should still be comfortable. The definition of trader hasn't changed, the laws around taxes payable haven't changed. HMRC is simply going to be getting another data source to attempt to spot people who are self employed and not declaring it... its easier to do that getting data from eBay than it is to visit every market stall. 

We'll have to wait and see what, if any, queries are generated to people as a result. It maybe simply the press coverage of the changes will have spurred 60% of the tax evaders on eBay to have now registered anyway. There are probably much easier cases to go after than someone selling the odd random assortment of things... the person selling £20,000 of mens clothes in sizes XXS to XXL will have a lot of explaining as to how that isn't trading. 

RFW

As above there largely isn't a grey area, nothing has changed as to how you are identified as a trader for tax purposes. If you buy or make to sell then you are a trader and have to declare when you sell more than £1000 in 12 months.

There isn't a £1000 threshold for private sellers. If you're a private seller then the marketplaces have a duty to report to HMRC over 30 items or the equivalent of 2000Euros. HMRC have said they will not do anything with this information unless they consider someone to be a trader, as has happened in the past, and they will ask them about it.

In the OP examples, the person who buys a coffee machine and uses it and then gets fed up with it is not trading in the coffee machine, it's a private purchase. The resale is not a trade transaction. Time is not relevant to this, I'm a trader and have loads of stock that is over 12 months old. If you use the item for personal use then it's not a trade transaction when you sell it.

The second example of purchasing in an auction house is slightly trickier. You'd need to account for the items purchased privately to offset the cost of the ones you didn't want. If it was the intention on purchase to sell the other items then that is trading. Trading has nothing to do with intent to make a profit, it is purely on intent, at time of purchase, to resell. You can work out your own pricing and write it down. I doubt anyone would ever be looking to see if your valuation was a fiver out or whatever.

I used to know someone who purchased items in a high street store on 3 for 2 type deals with reward points, they would boast that they only used one item in each set of 3 and resold the others. This snowballed into quite a lot of money but they were convinced they were not a trader, HMRC decided differently.

Proof of purchase is also irrelevant to trading, although if you are trading you need to keep track of purchase prices and have receipts. Whilst some people do keep receipts for everything ever purchased most people don't and you're not expected to if you aren't a trader.

The new laws about information passed to HMRC is part of an international ruling to stop international tax evasion.

Spoonie_Turtle

This tool may be useful:
https://www.gov.uk/check-additional-income-tax

And even if you don't click through all the way, the first few questions should help people make a decision about whether they are trading or not.

Codename66

Why don’t you just look on the HMRC website the answer will be there 

Marky19

Hi there wonder if anyone can help me

i work a part time job PAYE and have just dropped hours earning £9500  a year now thus am under the tax bracket for paying tax

i am looking to now buy and sell vinyl and collectibles on eBay as a small profit making side hustle

im aware of the self assessment £1000 limit on ebay 

do I need to pay tax as soon as I hit £1000 in sales or is this profit? Also do I submit self assessment on both earnings combined for the year which may not even go over the 12500 odd tax allowance combined?? Please help 

soolin

Marky19 said:

Hi there wonder if anyone can help me

i work a part time job PAYE and have just dropped hours earning £9500  a year now thus am under the tax bracket for paying tax

i am looking to now buy and sell vinyl and collectibles on eBay as a small profit making side hustle

im aware of the self assessment £1000 limit on ebay 

do I need to pay tax as soon as I hit £1000 in sales or is this profit? Also do I submit self assessment on both earnings combined for the year which may not even go over the 12500 odd tax allowance combined?? Please help 

As this has been covered several times, and HMRC FAQ sheets may be easier to understand than me- I will keep my explanation brief.

As soon as you hit £1000 of sales/turnover within a tax year, and that includes the postage you charge the buyer, you need to register with a business seller within that tax year. You would then need to submit a tax return, online is by 31st Jan in the year following - but never leave it that late in case of issues as tax return can be submitted at any point after 6th April. You will need to register a gateway account with HMRC if you don't already have one.

When you do your tax return you show your PAYE income, plus anything else that is taxable, savings interest benefits etc (Only if taxable). Your accounts can be simple, keep a note of all income (including postage) and all outgoings , including postage paid, item cost , printer ink, packaging etc. You can either show your accounts as :

Total income     xxxx
less trading allowance of £1000

or 
total income  xxxx
less actual expenses of XXX

the net amount is then taxable.

HMRC will allocate your personal allowance against your total income from all sources and if income does not exceed allowances then you have no income tax to pay.