What do we make of this?

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 your tax position when selling items using online platforms and what the platforms might report to HMRC useful: https://www.litrg.org.uk/working/gig-economy/online-traders-and-using-platforms and  https://www.litrg.org.uk/working/gig-economy/oecd-rules. 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.

Langerhan

If you buy digital watches with the intent of fixing them and selling them for a profit, then yeah, you're trading. The fact that HMRC will now be getting your information automatically instead of having to make a legal request for it doesn't change that.

They even give the example of upcycling on their examples page: https://www.gov.uk/guidance/check-if-you-need-to-tell-hmrc-about-your-income-from-online-platforms

forgotmyname

Langerhan said:

If you buy digital watches with the intent of fixing them and selling them for a profit, then yeah, you're trading. The fact that HMRC will now be getting your information automatically instead of having to make a legal request for it doesn't change that.

They even give the example of upcycling on their examples page: https://www.gov.uk/guidance/check-if-you-need-to-tell-hmrc-about-your-income-from-online-platforms

It's not about "selling them for profit".  Buying to resell is a trader.   His business model could be buy a £10 watch and spend 10 hours fixing it

with £20 worth of parts and then resell it for £5.  It's still a business just a poor one.

Mate noticed a bit of a craze in a certain line of items on ebay, lots of sellers and lots of equipment started appearing so he bought the full kit.
Selling them on ebay. When I asked him how much each item cost he didn't know.  Just listed them for the same amount as many other
sellers.  I said what if they are buying the supplies for half what you pay. It didn't last, I think he realised that he was not making money and
more likely actually losing money.

Krakkkers

I just can't get my head around this, i buy old watches mainly for cash at jumble and car boot sales so no record of those transactions and incur travel expenses in doing so, then if i fix them i sell on ebay.
These proposals only mention income? how do i prove what i spent? there are no records.
Will HMRC just take my word for it that i spent X amount on watches and diesel and other related items?
I may well be classed as a trader under these new rules but if i am a business then i am a bad business because i don't care whether i make a profit of not, i enjoy the process.
I don't want to spend my time keeping records or filling out self assessment forms.

Spoonie_Turtle

Krakkkers said:

I just can't get my head around this, i buy old watches mainly for cash at jumble and car boot sales so no record of those transactions and incur travel expenses in doing so, then if i fix them i sell on ebay.
These proposals only mention income? how do i prove what i spent? there are no records.
Will HMRC just take my word for it that i spent X amount on watches and diesel and other related items?
I may well be classed as a trader under these new rules but if i am a business then i am a bad business because i don't care whether i make a profit of not, i enjoy the process.
I don't want to spend my time keeping records or filling out self assessment forms.

These are not new rules.  It has been the case for years that if you were trading you needed to register with HMRC as a sole trader if you received more than £1000 from trading (providing goods or services).  And I believe before they brought in the trading allowance you had to register regardless of how much you were bringing in.

The £1000 trading allowance is an option for people not to have to detail all their expenses, they just write off the first £1000 as expenses and anything above that is classed as profit which is taxable if along with the rest of your income you're over the ~£12k threshold.

Respectfully, it is your choice not to keep records, not HMRC's fault.  But since you can write off the first £1000 it might be that you don't have to keep detailed records, only of the money you receive for it.

https://www.gov.uk/guidance/tax-free-allowances-on-property-and-trading-income

https://www.litrg.org.uk/working/self-employment/trading-allowance

https://www.litrg.org.uk/news/are-you-using-trading-allowance-correctly

crispy_duck

forgotmyname said:

Langerhan said:

If you buy digital watches with the intent of fixing them and selling them for a profit, then yeah, you're trading. The fact that HMRC will now be getting your information automatically instead of having to make a legal request for it doesn't change that.

They even give the example of upcycling on their examples page: https://www.gov.uk/guidance/check-if-you-need-to-tell-hmrc-about-your-income-from-online-platforms

It's not about "selling them for profit".  Buying to resell is a trader.   His business model could be buy a £10 watch and spend 10 hours fixing it

with £20 worth of parts and then resell it for £5.  It's still a business just a poor one.

Mate noticed a bit of a craze in a certain line of items on ebay, lots of sellers and lots of equipment started appearing so he bought the full kit.
Selling them on ebay. When I asked him how much each item cost he didn't know.  Just listed them for the same amount as many other
sellers.  I said what if they are buying the supplies for half what you pay. It didn't last, I think he realised that he was not making money and
more likely actually losing money.

Just because he's trading shambolically it doesn't mean that he isn't trading.

soolin

Krakkkers said:

I just can't get my head around this, i buy old watches mainly for cash at jumble and car boot sales so no record of those transactions and incur travel expenses in doing so, then if i fix them i sell on ebay.
These proposals only mention income? how do i prove what i spent? there are no records.
Will HMRC just take my word for it that i spent X amount on watches and diesel and other related items?
I may well be classed as a trader under these new rules but if i am a business then i am a bad business because i don't care whether i make a profit of not, i enjoy the process.
I don't want to spend my time keeping records or filling out self assessment forms.

All covered in my earlier post and in other posts from regulars. There are NO NEW rules, businesses and that includes small sole traders have always needed to be declared as such (with the usual caveat around the trading allowance) .

See my earlier reply about simple book keeping as well. Technically HMRC can ask to inspect your books for any reason at any time, but they randomly do this and percentage wise you may never get checked. You do need to keep them though in case. 

From a simplistic view, a business is a business whether good or bad. Look at some of the big high street businesses that have closed recently due to years of large trading losses - should hey have not bothered declaring as they weren't making a profit?

However the one thing to remember , and I will keep saying this, is that there are NO NEW RULES. 

Langerhan

forgotmyname said:

Langerhan said:

If you buy digital watches with the intent of fixing them and selling them for a profit, then yeah, you're trading. The fact that HMRC will now be getting your information automatically instead of having to make a legal request for it doesn't change that.

They even give the example of upcycling on their examples page: https://www.gov.uk/guidance/check-if-you-need-to-tell-hmrc-about-your-income-from-online-platforms

It's not about "selling them for profit".  Buying to resell is a trader.   His business model could be buy a £10 watch and spend 10 hours fixing it

with £20 worth of parts and then resell it for £5.  It's still a business just a poor one.

Mate noticed a bit of a craze in a certain line of items on ebay, lots of sellers and lots of equipment started appearing so he bought the full kit.
Selling them on ebay. When I asked him how much each item cost he didn't know.  Just listed them for the same amount as many other
sellers.  I said what if they are buying the supplies for half what you pay. It didn't last, I think he realised that he was not making money and
more likely actually losing money.

True in general, but the fact OP is intending to make a profit is a really clear badge of trade.

Krakkkers

So if you only buy and sell on ebay will HMRC note the difference between total sales and total purchase price and tax you on that?
This will be the first year that I have gone over £1000 so I am baffled by this.

the_lunatic_is_in_my_head

Krakkkers said:

This will be the first year that I have gone over £1000 so I am baffled by this.

The tax year is April to April so you can still register for this year and would have until 31st of Jan 2026 to file the tax return online for the tax year April 2024-April 2025. 

They tax you based on the records you provide, add up all the expenses that relate solely to your business (the watches, the packaging, postage, milage, eBay fees), download the eBay transaction spreadsheet and total up the sales (including postage charges). 

On the tax return there's a box for expenses and a box for income, tax is on the difference (obviously you have a personal allowance which may or may not be used up by other income). 

Keep a record of all figures for 6 years so a box file for paperwork (box file is an expense, keep the receipt), excel file for eBay transactions, once you get in the swing of it it will be second nature