eBay Private Seller - Self Assessment Tax Return??

se2020

subjecttocontract said:

Whatever happened to innocent until proven guilty ?......HMRC need to provide evidence of guilt, until then you are innocent.

How will this work ? ......So, they send you a letter suggesting you are trading......you just send a letter back saying you are not and invite them to provide evidence to the contrary ?

They will need something to go on,
Ie, you sell 2 sets of golf clubs on ebay at £750 each.
One set right-handed, one set left-handed.
I can see the AI software picking up on that and you getting a letter..

More likely,  they will be looking for sellers that sell multiples of the same type/style of item. 
New/unused items. Women selling mens clothing while claiming a single-person council tax discount etc etc

I don't know how smart the software is but seeing as ebay is using AI not only to search listings but also write item descriptions I can't see it would take much to identify "traders"

Also hmrc have been able to access your bank/paypal/etc accounts since 2020.
If you spend £200 in TKmaxx every week and sell £400 worth of clothes on ebay every week the computer might point you out.

I'd guess they will match records up though. So if you earn £100k a year as a model £200 on designer clothes might be normal.
If you earn £10k doing 10hrs a week in a supermarket they might think you are trying to make a bit of undeclared on the side..

se2020

Cosmic_Squidly said:

Also what year does it cover exactly? The new rules came into effect on Jan 1st this year, but they won't have to report until the end of Jan 2025. So they would be reporting the 2024 calendar year and on, right? So it won't be back-dated is my understanding?

Tax is always back-dated.
The "tax year" runs from April to April and you are required to report qualifying income by the end of Jan the following year.

Ie, if you sell something on ebay today the income will be within the 23-24 tax year.
Hmcr need to know the details by Jan 2025.
So, anything sold after April 2024 must be reported by Jan 2026.

Additionally,  although the information will now be sent to hmrc automatically,  they have previously had the power to request it anyway.  And this data is stored by ebay etc previously. 

Hmrc can go back (backdate) 4yrs if an innocent error has been committed. 
They can go back 6yrs if you have been "careless or negligent ". I expect "failing to know you should have been paying tax on stuff you bought to resell" will fall under the 6yr?
If deliberate fraud has been committed its 20yrs (or longer if they can provide good reason)

JAG

Mjb2223 said:

Cosmic_Squidly said:

Also what year does it cover exactly? The new rules came into effect on Jan 1st this year, but they won't have to report until the end of Jan 2025. So they would be reporting the 2024 calendar year and on, right? So it won't be back-dated is my understanding?

My friend who is 68  who has been selling some bits on ebay asked me this today and i didnt know.. id be interested to know this too

I think it would work something on the lines of:

Reporting period: 1st January 2024 to 31 December 2024.
Any seller with 30+ items sold during the year 2024 or exceeding £1000 in gross sales will generate a report that will be sent to HMRC in January 2025.
1st January 2024 to the 5th April 2024 sales will be under the tax year 2023/24.
6th April 2024 to 31st December 2024 sales will be under the tax year 2024/25
The sending of this report will generate a "nudge" letter to the person from HMRC about declaring income.
There will be a cut off point whereby any report over a certain £ will be looked at manually.
If there is suspicion of trading and undeclared income then HMRC will investigate further by requesting sales data from eBay for previous years prior to 2024.

Miser1964

There's no new tax legislation being introduced, the £1,000 'Trading Allowance' began on 6th April 2017.

What's changing is that the selling platforms are automating providing information on sales to HMRC to flush out volume traders who have been masquerading as private sellers.

horsewithnoname

se2020 said:

Not quite innocent until guilty..
I expect quite a few people will get letters (ad this can be done easily enough by an automated process)
I have read several posts from people who have had letters already. 

I am aware hmrc do not possibly have the resources to investigate every seller that the computer flags up but, I presume, they must have/will delegate enough resources into investigating at least some of these sellers otherwise why burden themselves asking for the information from ebay etc anyway?
I would guess the report receiving systems/software have cost several thousand (at best!) and I would believe they would need to have shown they would be of benefit (ie enforcement was possible) before spending the money on them.

So, my guess is, a few people WILL get looked at. 
Just Google "hmrc burden of proof"
As the law regarding hmrc currently stands, hmrc will look thorough the figures and claim you owe £xxx in tax.
You then have to provide proof that the figures they suggest are incorrect (or pay the bill)

Obviously before it gets to that stage they will give you chance to explain (convince them) that the stuff you are selling does not attract tax etc.

But, as per the example a few posts previously,  those that have "seen a bargain" and thought "I can make a quick profit" on it could well end up with a tax bill with no legitimate reason to reduce it.
Ie, they are already "guilty" but probably completely unaware that tax was due anyway.

I'd guess the warning letters will shock a few people like that into either "trading" properly (and paying any tax if due) or sticking below the £1k a year.

Those that currently know what they are doing and just sell for profit avoiding any due taxes will probably just keep playing the system and hopefully the hmrc computer/software will be smart enough to target these and eliminate the others. 

Well I’m sure everyone who should be declaring their income is already doing so, so everyone will be fine. 

se2020

horsewithnoname said:

se2020 said:

Not quite innocent until guilty..
I expect quite a few people will get letters (ad this can be done easily enough by an automated process)
I have read several posts from people who have had letters already. 

I am aware hmrc do not possibly have the resources to investigate every seller that the computer flags up but, I presume, they must have/will delegate enough resources into investigating at least some of these sellers otherwise why burden themselves asking for the information from ebay etc anyway?
I would guess the report receiving systems/software have cost several thousand (at best!) and I would believe they would need to have shown they would be of benefit (ie enforcement was possible) before spending the money on them.

So, my guess is, a few people WILL get looked at. 
Just Google "hmrc burden of proof"
As the law regarding hmrc currently stands, hmrc will look thorough the figures and claim you owe £xxx in tax.
You then have to provide proof that the figures they suggest are incorrect (or pay the bill)

Obviously before it gets to that stage they will give you chance to explain (convince them) that the stuff you are selling does not attract tax etc.

But, as per the example a few posts previously,  those that have "seen a bargain" and thought "I can make a quick profit" on it could well end up with a tax bill with no legitimate reason to reduce it.
Ie, they are already "guilty" but probably completely unaware that tax was due anyway.

I'd guess the warning letters will shock a few people like that into either "trading" properly (and paying any tax if due) or sticking below the £1k a year.

Those that currently know what they are doing and just sell for profit avoiding any due taxes will probably just keep playing the system and hopefully the hmrc computer/software will be smart enough to target these and eliminate the others. 

Well I’m sure everyone who should be declaring their income is already doing so, so everyone will be fine. 

They should be
No rules have changed.
No new limits have been set.

If all you are doing is selling clutter & old unwanted personal items then carry on. 

Those who are buying stuff when they see it cheap knowing they will make a few quid listing it on ebay and those making stuff to sell on marketplace as a side-hussle might want to get upto speed with the existing rules...

messia07

Mjb2223 said:

Cosmic_Squidly said:

Also what year does it cover exactly? The new rules came into effect on Jan 1st this year, but they won't have to report until the end of Jan 2025. So they would be reporting the 2024 calendar year and on, right? So it won't be back-dated is my understanding?

My friend who is 68  who has been selling some bits on ebay asked me this today and i didnt know.. id be interested to know this too

the daily mail has a recent article on this. they state that from jan 1st 2024, online platforms will have to share the amount of income generated by an individual between jan 1st and dec 31st 2024 for the 2025 tax year.


 

Defensivea

vacheron said:

I can see how this can seem like a minefield for for many who have never needed to consider non-PAYE taxation.

These are the rules as I interpret them, and as many have said on this thread, these taxes are not new, it was simply up to the individual to realise when their income was taxable and report as necessary, however as this may now be done for you by your trading platforrm of choice, there is less opportunity to "forget" to inform HMRC as people may have done previously:

1. If you buy or make items with the purpose of re-selling for profit and the income (i.e. ALL the money you recieve for these endeavours) does not exceed £1000 in each tax year (before any deductions for things like eBay fees and postage etc) then you do not need to report this to HMRC.
   
   
2. If you buy or make items with the purposes of re-selling for profit and the income (i.e. ALL the money you recieve for these endeavours) does exceed £1000, then you do need to report this to HMRC, however you can still receive the initial £1000 trading allowance but the remainder will be taxed based on any profits (not your total income), so you can apply the usual deductions etc. as you would for any other potentially taxable income.
   
   
3. If you are selling your own personal posessions, i.e. things which you purchased for your own use, or were gifted (and which are generally sold at less than their initial purchase price) then these items are not considered part of the £1000 trading allowance and you do not need to report this to HMRC.
   
   
4. If you are selling your own personal posessions i.e. things which you purchased for your own use, or were gifted, and these have increased in value since you aquired them, these sales may attract capital gains tax depending on what the item is. However you are allowed to incur £6000 of capital gains tax free each year but this will fall to £3000 in 2024-25. 

In my personal situation, my eBay income last year came from 4 streams, I have listed them below, and how I approached them:

• Old items I don't need any more. (our own clothes and books etc.that are too good for the charity bag, my sons old toys etc.) these do not need to be reported.

• A lot of old electrical equipment and components which I was gifted when my old factory closed down about 4 years ago. Any items which I have come to realise I will never use have been listed for sale. These are being sold well below market value to clear space in my garage, were not obtained with the intention to sell, and when they are gone, they are gone. Again, not trading so no need to be reported.

• Items which I have purchased at a bargain price with the intention to re-sell. This year this has included some PC components (corsair RGB case fans) where I have needed two  but found it cheaper to buy a pack of 6 and then list the others for sale to make my money back. I also purchased 3 reasonably inexpensive watches (around £150 each) one of which I kept, and the othey two I sold for £275 each. This I would consider as "trading" to be safe, but as these items all together do not exceed £1000 I do not need to declare this

• I sold a couple of watches from my own personal collection for more than I initially paid about 10-15 years ago and the total gain was approximately £4000. As this is less than my £6000 annual capital gains allowance that normally not have been a consideration, however, this year I also sold some shares which used allowance meaning I may have had to pay capital gains tax on this £4000. However, as "machinery" is excempt from CGT, and HMRC define a mechanical watches as "machinery", these are considered a "wasting asset" and as such there is no CGT to pay.

Perfect. Thank you!

I hadn't appreciated that the £1k is a tax allowance.
I thought it was an arbitrary threshold based on financial proportionality/HMRC capacity.

Tax on the profit associated with the £200 earnings is more manageable than on the profit associated with the £1.2k earnings.

Thank you for sharing your examples and have a great day!

subjecttocontract

HMRC are just looking for the easy life. The platforms do the reporting to them and all they need to do is cherry pick those few for further investigation. I would imagine there are also large numbers doing boot sales a couple of times a week and making undeclared income. I wonder how long before those people are in their sights ?

badmemory

They are definitely going after the low hanging fruit & avoiding the larger more difficult stuff.