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

JacobEdgar

As with everything HMRC, is overly complicated, confusing and can be understood in both ways. There should be a easy example for each trade, being eBay so massively used.

I understand it isn't foreign income, as it is like if a US tourist comes to my shop and buys something with his american credit card. He might be foreign, his bank might be foreign, but the activity was carried in UK.

Different would be if I had also a shop in USA; that would be foreign income for the purpose of HMRC, I understand.

All the same the amount is under all tax thresholds, I only reached 3700 gross income!

Jeremy535897

JacobEdgar said:

As with everything HMRC, is overly complicated, confusing and can be understood in both ways. There should be a easy example for each trade, being eBay so massively used.

I understand it isn't foreign income, as it is like if a US tourist comes to my shop and buys something with his american credit card. He might be foreign, his bank might be foreign, but the activity was carried in UK.

Different would be if I had also a shop in USA; that would be foreign income for the purpose of HMRC, I understand.

All the same the amount is under all tax thresholds, I only reached 3700 gross income!

That is correct. A shop would be a permanent establishment, and so you would be subject to US tax. Article 7 of the US-UK double tax agreement says "1.  The business profits of an enterprise of a Contracting State shall be taxable only in that State unless the enterprise carries on business in the other Contracting State through a permanent establishment situated therein.  If the enterprise carries on business as aforesaid, the business profits of the enterprise may be taxed in the other State but only so much of them as are attributable to that permanent establishment."
That is why I said I can't think of any likely US income tax to claim credit for, so you don't need to complete SA106 or apportion your income. It may be different for UK authors who receive US royalties, for example.

LITRG

Hello. We are the Low Incomes Tax Reform Group (LITRG), part of the Chartered Institute of Taxation who are an educational charity. We are not part of HMRC or MSE. Although we can’t give individual advice, you might find our website information about when something is considered foreign income, useful: https://www.litrg.org.uk/international/uk-tax-uk-residents-foreign-income-and-gains#2. If you require further help, we recommend that you contact a tax adviser, HMRC or one of the tax charities where relevant. You can find more information about where to get help with tax here: https://www.litrg.org.uk/tax-nic/getting-help-tax. Thanks.

Jeremy535897

LITRG said:

Hello. We are the Low Incomes Tax Reform Group (LITRG), part of the Chartered Institute of Taxation who are an educational charity. We are not part of HMRC or MSE. Although we can’t give individual advice, you might find our website information about when something is considered foreign income, useful: https://www.litrg.org.uk/international/uk-tax-uk-residents-foreign-income-and-gains#2. If you require further help, we recommend that you contact a tax adviser, HMRC or one of the tax charities where relevant. You can find more information about where to get help with tax here: https://www.litrg.org.uk/tax-nic/getting-help-tax. Thanks.

That says "profits from running a business abroad," but not "profits from selling goods to someone abroad by a business run in the UK."

MetaPhysical

My understanding is that "foreign income" is when you have sold things within that foreign country or you have shares paying dividends or interest bearing accounts inside that country.  What you are doing OP is shipping things to that country and they are paying you in a way that get converted into UK currency and as a sale.  So that incme is UK income and NOT foreign income.

mybestattempt

MetaPhysical said:

My understanding is that "foreign income" is when you have sold things within that foreign country or you have shares paying dividends or interest bearing accounts inside that country.  What you are doing OP is shipping things to that country and they are paying you in a way that get converted into UK currency and as a sale.  So that incme is UK income and NOT foreign income.

Would explain why then, in the context of self employment income, HMRC describe receipts derived from overseas as foreign income?

MetaPhysical

mybestattempt said:

MetaPhysical said:

My understanding is that "foreign income" is when you have sold things within that foreign country or you have shares paying dividends or interest bearing accounts inside that country.  What you are doing OP is shipping things to that country and they are paying you in a way that get converted into UK currency and as a sale.  So that incme is UK income and NOT foreign income.

Would explain why then, in the context of self employment income, HMRC describe receipts derived from overseas as foreign income?

Yes.
To illustrate, I have US based shares that I operate from a broker account in New York.  I have signed a US Internal Revenue W8-BEN form with that bank (Morgan Stanley) that exempts me from US based taxes on the dividends/gains on the basis that it will be taxed in the UK (there are reciprocal arrangements between HMRC and the US Internal Revenue service [and many other countries]).  I convert the dividends I make from these shares into ££ and declare them on my UK tax return on the foreign income pages using approved HMRC exchange rates for the dates in question. This income then gets added to the rest of my other income on the tax return for the year in question.

I have been doing this for 14 years and have had no push back from HMRC.  This is the definition of foreign income in my view, although I hasten to add that I am not an accountant.  Sounds complex but it is a single box on the tax return and takes five minutes.
You can also do it the opposite way and pay tax in the US and then declare the income as "taxed-income" on the UK tax return foreign pages and HMRC won't tax you again on it. I have never done it this way though and can't comment further from experience.

The OP is not doing any of this.  He/she is selling stuff to someone overseas.  The profits from that sale is UK based income still and the foreign pages are not involved.

I am sure an accountant could add more colour to this. 

mybestattempt

MetaPhysical said:

mybestattempt said:

MetaPhysical said:

My understanding is that "foreign income" is when you have sold things within that foreign country or you have shares paying dividends or interest bearing accounts inside that country.  What you are doing OP is shipping things to that country and they are paying you in a way that get converted into UK currency and as a sale.  So that incme is UK income and NOT foreign income.

Would explain why then, in the context of self employment income, HMRC describe receipts derived from overseas as foreign income?

Yes.
To illustrate, I have US based shares that I operate from a broker account in New York.  I have signed a US Internal Revenue W8-BEN form with that bank (Morgan Stanley) that exempts me from US based taxes on the dividends/gains on the basis that it will be taxed in the UK (there are reciprocal arrangements between HMRC and the US Internal Revenue service [and many other countries]).  I convert the dividends I make from these shares into ££ and declare them on my UK tax return on the foreign income pages using approved HMRC exchange rates for the dates in question. 

I have been doing this for 14 years and have had no push back from HMRC.  This is the definition of foreign income in my view, although I hasten to add that I am not an accountant.  Sounds complex but it is a single box on the tax return and takes five minutes.
You can also do it the opposite way and pay tax in the US and then declare the income as "taxed-income" on the UK tax return foreign pages and HMRC won't tax you again on it. I have never done it this way though and can't comment further from experience.

The OP is not doing any of this.  He/she is selling stuff to someone overseas.  The profits from that sale is UK based income still and the foreign pages are not involved.

I am sure an accountant could add more colour to this. 

You haven't answered my question and I think you misunderstand the basic principles.

Foreign income is income derived from outside the UK. 

A UK resident is taxable in the UK on worldwide income if that income is taxable under UK domestic tax legislation.

So, income derived from overseas (foreign income) can be:

Foreign income which is not taxable in the UK e.g. a cash gift from an overseas relative.

Foreign income which is taxable in the UK because it is trading income, employment income, property income, interest, dividends etc

Some foreign income may have suffered foreign tax, some not.

How the UK resident completes a self assessment return to arrive at his/her UK tax liability depends on the type of UK taxable foreign income.  In some cases it is necessary to complete the foreign pages (SA106) in others not; the Foreign (SA106) notes are helpful in this respect.

mybestattempt

[Deleted User] said:

mybestattempt said:

Would explain why then, in the context of self employment income, HMRC describe receipts derived from overseas as foreign income?

Just to make it easier to explain why you think what you do, can you point me to where HMRC says that.

The last answer on the link to the HMRC Community Forum (provided earlier in this thread) and the Foreign SA106 pages along with the Foreign (SA106) notes.
 

Jeremy535897

The notes to SA106 (page FN16) say:
"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. If the income is from the overseas branch of a UK business, put the gross profits earned by the branch in column F."
As I said earlier, if you just sell goods in your shop here to someone on holiday from France, you don't pay French income tax on the sales. If you export those goods to France rather than the French customer coming into your shop, you don't pay French income tax on the goods exported.
But if you have 10 shops and one is in France, then although you have a UK based trade, you may be subject to French income tax on the French shop's profits. That is when you have to allocate your profits between overseas and UK sources.