eBayer worrying about new HMRC Reporting Requirements

SockDisorder

An autistic and mentally unwell girl I know has been selling on Ebay and Vinted for a couple of years. Her heath condition is important as she's been in receipt of disability benefits (UC/PIP). 

So, firstly...

She does general art and crafts and makes cards as a hobby to give to people, not for profit - but if (for example) she buys a pack of ten stickers or cards, and only needs one, she'll sell the remainder on Ebay to cover some of the costs.

Or, if she buys an item from AliExpress, but it doesn't work for her, she'll then sell it on again.

At some point she got into a habit of over-shopping and hoarding and ended up with stacks of stickers as a result. So, she's been slowly offloading most of them, while occasionally replenishing her supplies.

They're not second-hand items, but she doesn't make any profit - typically she covers her costs, but it's often about offloading stuff she doesn't need in order to prevent waste. 

She thinks she's done 90 transactions on eBay this year alone, and with the postage and packing costs it's a few hundred quid.

So, while this isn't a profit-making venture, it could easily look like one to an observer.

Unfortunately, she doesn't keep great records of her expenses - she never felt any need until now.

Secondly...

Over on Vinted she sells a lot of second-hand Jigsaw Puzzles - all puzzles she's completed, but once finished she offloads them on to make space for more. 

She probably completes two puzzles a week and has already sold quite a few this year.

With both accounts she may occasionally offload other hobby related items, clothes, unwanted gifts, etc.

Anyway, HMRC...

She's just stumbled on the new rules about online platforms reporting seller information to HMRC, and she's gotten into a panic about it (and also angry that she didn't find out before).

She thinks she's going to be in trouble, lose her disability benefits and get burdened with all kinds of trouble she never intended.

She thinks her two accounts will be tallied, feels the government is treating her unfairly - as she had no intention of breaking any rules - and now thinks all her stuff is going to end up in landfill rather than part of the circular economy.

So, I need some guidance what to tell her and what action steps she should take next, if any. 

My own thoughts are to ditch the eBay sales and stick with Vinted only, but I'm no expert and would welcome any ideas.

badmemory

It is not just ebay who will be reporting but vinted etsy & many others.  How much do the transactions add up to in a year.

SockDisorder

badmemory said:

It is not just ebay who will be reporting but vinted etsy & many others.  How much do the transactions add up to in a year.

I know this - it'll potentially be more than a couple of thousand in total, including postage etc. 

GrahamLM52

I too was concerned and asked eBay for advice and they pointed me to this:

https://www.ebay.co.uk/sellercentre/selling/selling-online-and-hmrc

booneruk

GrahamLM52 said:

I too was concerned and asked eBay for advice and they pointed me to this:

https://www.ebay.co.uk/sellercentre/selling/selling-online-and-hmrc

If only something like this filled the newspapers when these new reporting to HMRC guidelines came in, rather than the inaccurate fearmongering we did get!

SockDisorder

I think the issue is that it looks like a business - the stickers and card making supplies are typically brand new but surplus to requirements - and it's this that raises the concern.

She packages them well, puts a 'do not bend' sticker on the envelope and has loads of them listed.

She definitely sells more than 30 items a year, and possibly reaches the gross income threshold (especially with postage costs).

She may need to prove that they're not being bought deliberately to make a profit - but how to do that is the question.

SockDisorder

GrahamLM52 said:

I too was concerned and asked eBay for advice and they pointed me to this:

The way I'm understanding it, is that eBay and Vinted will report her because she exceeds the margins - but it will be up to the tax office to pursue her if they think she's trading.

Because of what she sells, it may raise an alarm - and the issue is 1. how to prove it isn't a business and that these are just surplus personal (but new) items -- and 2. if they don't accept this, how it may affect her disability benefits.

I wish that link had more examples, but I think it's eased her fears a little.

Spoonie_Turtle

Whatever happens, her PIP won't be affected.

If it's genuinely secondhand stuff, bought for her to use and just being sold because they're now surplus, her UC is fine too and she doesn't need to worry there.

The arts and crafts things she actually makes would fall under business IF she sells them, but you say she gives them to people so that's not a problem either.

I know easier said than done, but keeping it in perspective will help.  In reality, with the amount of people who'll be caught up in the reporting thresholds (the majority probably being genuinely private sellers), HMRC will only have the resources to go after the biggest sellers who are clearly unregistered businesses receiving most likely tens of thousands of pounds in revenue.
The reporting thresholds are apparently something to do with EU reporting, but for HMRC they will a) help them find businesses needing investigating, and b) scare some unreported businesses into compliance, saving HMRC from having to go after them.

For private sellers, nothing has changed.  So for selling off their own unwanted/unneeded stuff, it might actually be suspicious if they'd kept receipts and everything - that's what a business would need to do, not private sellers.

Brie

I was under the impression that if you kept a record of how much you paid for things and then how much you sold them for it would only be the profit that would be taxed once that profit exceeded £1k.  Doesn't sound like she is exceeding this if she's selling things on at cost.

Spoonie_Turtle

Brie said:

I was under the impression that if you kept a record of how much you paid for things and then how much you sold them for it would only be the profit that would be taxed once that profit exceeded £1k.  Doesn't sound like she is exceeding this if she's selling things on at cost.

That's the problem with things being conflated in the reporting.

You have to register with HMRC if your gross receipts from trading are £1,000 or more.

AIUI you can use that £1,000 trading allowance as the figure for your costs, or you can do a full income minus expenses calculation if the costs are likely to be more than £1,000.  (My understanding of it may be *too* simplified though.)
https://www.litrg.org.uk/working/self-employment/trading-allowance

From whichever method you use, the resultant profit is taxable income - but if your total taxable income from all sources is still below the £12k personal allowance, you wouldn't have to pay tax on it anyway.

RFW

SockDisorder said:

GrahamLM52 said:

I too was concerned and asked eBay for advice and they pointed me to this:

The way I'm understanding it, is that eBay and Vinted will report her because she exceeds the margins - but it will be up to the tax office to pursue her if they think she's trading.

Because of what she sells, it may raise an alarm - and the issue is 1. how to prove it isn't a business and that these are just surplus personal (but new) items -- and 2. if they don't accept this, how it may affect her disability benefits.

I wish that link had more examples, but I think it's eased her fears a little.

First, there aren't any new rules as to what constitutes a trader and when you should declare being a business to HMRC. The only changes are with the companies who are being asked to report. HMRC have said, repeatedly, that there is nothing new.

Making a profit isn't relevant to running a business and/or declaring it, although making a loss would mean there was no tax to pay if it is considered a business.

From the opening post it isn't clear whether there is some trading happening. The best thing to do would be to be contact HMRC and ask their advice or maybe Citizens' Advice who could help with the benefits side.
I doubt there's anything to worry about