Are eBay sales to USA count as foreign income for the HMRC?

JacobEdgar

I was just about to complete my first Self Assessment tax for last year, but I have been asked if I received any foreign income. Most of my sales were through eBay, and were to overseas buyers, USA, Canada, etc.

Do I have to say yes, this is foreign income as it comes from abroad, or not, because I am resident in UK and what I sold counts as a sale made in UK? I sold them through eBay.com, if that changes anything. Thanks.

mybestattempt

Yes, it's foreign income as it comes from a source outside the UK.

Assuming you're a sole trader it's assessable on you as self employment income as you are resident in the UK.

You may find this helpful:

https://www.gov.uk/tax-foreign-income

Jeremy535897

mybestattempt said:

Yes, it's foreign income as it comes from a source outside the UK.

Assuming you're a sole trader it's assessable on you as self employment income as you are resident in the UK.

You may find this helpful:

https://www.gov.uk/tax-foreign-income

If you are a UK based trader, the fact that you sell some goods to overseas customers does not make those sales foreign income. 

mybestattempt

Jeremy535897 said:

mybestattempt said:

Yes, it's foreign income as it comes from a source outside the UK.

Assuming you're a sole trader it's assessable on you as self employment income as you are resident in the UK.

You may find this helpful:

https://www.gov.uk/tax-foreign-income

If you are a UK based trader, the fact that you sell some goods to overseas customers does not make those sales foreign income. 

On what basis would the income of a UK resident arising from a source outside the UK not be foreign income?

I'm interested in what legislation you can point me to please in this respect.

In the OP's situation the sales income from USA, Canada etc would, I believe, be foreign income which is trading income taxable in the UK accordance with S6 ITTAOA 2005.

mybestattempt

[Deleted User] said:

mybestattempt said:

Jeremy535897 said:

mybestattempt said:

Yes, it's foreign income as it comes from a source outside the UK.

Assuming you're a sole trader it's assessable on you as self employment income as you are resident in the UK.

You may find this helpful:

https://www.gov.uk/tax-foreign-income

If you are a UK based trader, the fact that you sell some goods to overseas customers does not make those sales foreign income. 

On what basis would the income of a UK resident arising from a source outside the UK not be foreign income?

I'm interested in what legislation you can point me to please in this respect.

In the OP's situation the sales income from USA, Canada etc would, I believe, be foreign income which is trading income taxable in the UK accordance with S6 ITTAOA 2005.

I think you may be confusing sales income with the where the trade is carried on.

Section 6 does not care where the sales are.  It cares where the trade is carried on.  While that is neither here nor there for a UK resident (unless they are non-domiciled and in partnership where the trade is managed and controlled offshore), it makes a difference for Class 4 NIC.

For NIC, if the trade is carried on wholly outside the UK then there is no Class 4 NIC on those profits.  So if you are right, it's a great NIC saving wheeze.  

Where the trade is carried on is a question of fact.  The various cases on where the trade is carried on show that this is a multi-factorial test where the different elements need to be looked at it in the round. Cases like Erichsen, the champagne cases, Firestone, Smidth, MacLean (and a lot of others) talk about this and, with some fact patterns, place emphasis on some particular aspect or other (place of contract, location of operations, management and control, location of assets, nature of the trade, holistic view of all activities associated with generating profits, etc).

No, I'm not confusing what is trading/sales income with where the trade is carried on.

The turnover of a trade which is carried on in the UK selling goods includes the sales/income it makes worldwide.

My point is that sales to customer outside the UK is foreign income as the source of that income is outside the UK.

In the OP's case he includes all sales to all customers as trading income then deducts allowable expenses to arrive at (assuming he's a sole trader) his self employment income/profit.

Jeremy535897

mybestattempt said:

Jeremy535897 said:

mybestattempt said:

Yes, it's foreign income as it comes from a source outside the UK.

Assuming you're a sole trader it's assessable on you as self employment income as you are resident in the UK.

You may find this helpful:

https://www.gov.uk/tax-foreign-income

If you are a UK based trader, the fact that you sell some goods to overseas customers does not make those sales foreign income. 

On what basis would the income of a UK resident arising from a source outside the UK not be foreign income?

I'm interested in what legislation you can point me to please in this respect.

In the OP's situation the sales income from USA, Canada etc would, I believe, be foreign income which is trading income taxable in the UK accordance with S6 ITTAOA 2005.

The source isn't where the customer is. It's where the trade is.It's simply part of your UK trading profits as section 6 clearly states. Otherwise every trader with a customer abroad would have to split his receipts and expenses between foreign and UK.
HMRC explain this here:
https://community.hmrc.gov.uk/customerforums/sa/4067c2d4-4959-ee11-a81c-6045bd0e378d

mybestattempt

Jeremy535897 said:

mybestattempt said:

Jeremy535897 said:

mybestattempt said:

Yes, it's foreign income as it comes from a source outside the UK.

Assuming you're a sole trader it's assessable on you as self employment income as you are resident in the UK.

You may find this helpful:

https://www.gov.uk/tax-foreign-income

If you are a UK based trader, the fact that you sell some goods to overseas customers does not make those sales foreign income. 

On what basis would the income of a UK resident arising from a source outside the UK not be foreign income?

I'm interested in what legislation you can point me to please in this respect.

In the OP's situation the sales income from USA, Canada etc would, I believe, be foreign income which is trading income taxable in the UK accordance with S6 ITTAOA 2005.

The source isn't where the customer is. It's where the trade is.It's simply part of your UK trading profits as section 6 clearly states. Otherwise every trader with a customer abroad would have to split his receipts and expenses between foreign and UK.
HMRC explain this here:
https://community.hmrc.gov.uk/customerforums/sa/4067c2d4-4959-ee11-a81c-6045bd0e378d

Those answers seem to be saying what I have said.

The sales to both UK and overseas customers are all included to arrive at the amount of trading profit/self employment income taxable in the UK.

There is one trade with one amount of profit to enter on the SA tax return (SA103).

Apportionment of that profit between that derived/sourced from UK customers and that derived/sourced from overseas customers (foreign income) would only come into play if there was a claim for foreign tax credit relief (SA106).

Jeremy535897

The notes to SA106 say:
Foreign tax paid on employment, self-employment and other income. If you’re claiming Foreign Tax Credit Relief on income included elsewhere in your tax return, fill in the columns below and say  in the ‘Any other information’ box (on page TR 7) where on your tax return this income is included. The country or territory  codes are shown in the ‘Foreign notes’. Make sure that the foreign tax being claimed is the ‘minimum’ due under the laws of the foreign country after all deductions, exemptions, reliefs and allowances have been claimed.

So you include all your trading income on SA103, as profits from a UK trade, and if for some reason you happen to have borne foreign income tax on some of that income, then you fill in SA106. If you have suffered customs duties, sales tax etc, they are just a reduction of your profit. There is no apportionment between "UK income" and "foreign income."

GDB2222

Is there any possibility, no matter how remote, that a US buyer could suffer harm from whatever you sell? Do you have insurance, and have you told your insurers you sell to the USA? 

mybestattempt

Jeremy535897 said:

The notes to SA106 say:
Foreign tax paid on employment, self-employment and other income. If you’re claiming Foreign Tax Credit Relief on income included elsewhere in your tax return, fill in the columns below and say  in the ‘Any other information’ box (on page TR 7) where on your tax return this income is included. The country or territory  codes are shown in the ‘Foreign notes’. Make sure that the foreign tax being claimed is the ‘minimum’ due under the laws of the foreign country after all deductions, exemptions, reliefs and allowances have been claimed.

So you include all your trading income on SA103, as profits from a UK trade, and if for some reason you happen to have borne foreign income tax on some of that income, then you fill in SA106. If you have suffered customs duties, sales tax etc, they are just a reduction of your profit. There is no apportionment between "UK income" and "foreign income."

If you look beyond the just the SA106 to the Foreign notes (SA106 notes) on page FN 16 it says about the figure for the foreign
taxable amount entry at column F on the SA106) that if you have a business in the UK and the gross receipts include income that you've paid foreign tax on, you need to work out the amount of profit that came from the overseas receipts.

So, at that point the profit figure (already entered on the SA103) needs to be apportioned between the profit attributable to UK receipts and the profit attributable overseas receipts to arrive at the figure for the SA106.

Jeremy535897

I cannot actually think of a case where you would pay US income tax when you sell things from your UK business and export them to the US. As the notes say, that can happen where you have a branch or agency abroad (although that will normally be changed to "permanent establishment" by the double tax agreement), but it simply won't happen when you just sell stuff from the UK and post it to American customers.