Hmrc letter

RFW

soolin said:

A photo of a cluttered house, or old receipts showing items bought new and then used by you for example. If in doubt, speak to an accountant. 

That's good advice. I'd also say to call HMRC and ask them how they want you to show it. An accountant could pick that up for you too

Barnes107

Id say it's half and half 
I'm not going to try and hide anything. 
I have definitely made a decent profit on the items that I have "traded" and I shall declare this and pay the tax due. 
I wonder if HMRC can actually SEE your listings, or do they only get data on number of transactions and total sales value?
I wonder if they accept disclosures based on an EXPECTED amount of tax due in that category?

E.g. The average reseller with 8k turnover pays about X amount

Spoonie_Turtle

Barnes107 said:

Id say it's half and half 
I'm not going to try and hide anything. 
I have definitely made a decent profit on the items that I have "traded" and I shall declare this and pay the tax due. 
I wonder if HMRC can actually SEE your listings, or do they only get data on number of transactions and total sales value?
I wonder if they accept disclosures based on an EXPECTED amount of tax due in that category?

E.g. The average reseller with 8k turnover pays about X amount

I wouldn't have thought so because how much tax is due (or whether any is) will be different for different people depending on whether they've used their full personal allowance, and what tax bracket they're in.

Your first step is to separate out all the items that were trading, and total up the gross receipts from those within the tax year.  Then you'll know for certain whether you need to be declaring anything, if it totals over £1,000.

Barnes107

I definitely have gone over £1000

Is it a matter of them "trusting" you?

I WILL be honest in declaring things, I have probably trebled my outgoings on the traded items. 

I just don't want any further troubles or scrutinisatuon on my personal listings, as it's such a stress and I don't have time for it all. 

I'm wondering if they see they're getting a decent amount of tax, whether they'll simply accept it and close the matter. 

soolin

Barnes107 said:

Id say it's half and half 
I'm not going to try and hide anything. 
I have definitely made a decent profit on the items that I have "traded" and I shall declare this and pay the tax due. 
I wonder if HMRC can actually SEE your listings, or do they only get data on number of transactions and total sales value?
I wonder if they accept disclosures based on an EXPECTED amount of tax due in that category?

E.g. The average reseller with 8k turnover pays about X amount

I may be a little out of date, but it used to be that HMRC assume the worst case scenario, ie everything sold is deemed to be trading, leaving the seller with the burden of providing accounts that show otherwise. If that is the case then you would need to show that some of it is reasonably explainable as truly private sales. They will almost certainly have a ball park figure in mind, but there is no way of knowing how close that is to the full amount returned by ebay.

Depending on whether HMRC will accept simple 3 line accounts now will depend on what they will consider reasonable. 

Start by doing accounts, -I'm old school so my books are simple. All income received (and that includes the postage element received) - if that total is under £1000 then technically it would not need to be declared - however HMRC might not accept this now you have 'the letter'. Assuming it is over £1000 anyway, then a separate 'book' of all expenses, so postage actually paid, item cost , packing materials - anything directly associated as a cost with those sales. The difference between gross income and expenses is what becomes subject to tax and NI.

(there is also the possibility of using the trading allowance instead of a full expense sheet but that is probably best discussed elsewhere).

Barnes107

Thats the thing..... Can HMRC SEE what you've sold I'm order to determine if it's personal / non taxable

soolin

Barnes107 said:

Thats the thing..... Can HMRC SEE what you've sold I'm order to determine if it's personal / non taxable

Not initially, but yes they will have you ebay details and be able to check your account. If you have more than one account then they will look at all of them as they will be linked via your NI number. 

soolin

Barnes107 said:

That seems an awfully time consuming practice for such small amounts!! 
Surely they're not paying somebody to go through a few hundred listings where tax owed is likely to be less than £800 for example 

The initial sort will be done by Bots, no need to manually look at anything. Real people will look at the results no doubt, and perhaps the higher grossing evaders.

If 100,000 people are 'caught' and they recover hundreds of thousands if not millions of pounds in revenue then it will be considered a result. This is just the tip of the iceberg, for well established sellers online the items haven't even been reported yet.

soolin

Barnes107 said:

There's probably THOUSANDS of ebayers like myself who have been caught out / caught unaware, and had the letter in the past few weeks. 

I suspect more like hundreds of thousands, I am seeing these initial letters reported all over the various forums. 

Of those that have done the right thing, and disclosed, SURELY HMRC will sort of accept a reasonable disclosure and formal offer of payment without spending hours and hours of time and resource going through an eBay account with a fine tooth comb!! 

If sellers have done 'the right thing' and disclosed then HMRC will already have their properly declared accounts, so no need to catch them out at all. I suspect there will though be a form of 'acceptable agreement' for those now being caught , but there will be no way of knowing what HMRC will consider reasonable, I suspect that at a certain declared amount HMRC will just accept it and raise the necessary tax bill and penalties (if charged). 

I feel it's a sort of "scare tactic" , a "campaign" to ensure ebayers going forward will now DEFINITELY comply to tax rules and get their house in order. 

If tax laws haven't sorted out the issue, then perhaps scare tactics will- and people reading this who haven't been caught but are doing a side hustle may now decide it is quicker and cheaper to declare, so a win win for HMRC.

I suspect more resources will be put into those who have had the letter, and haven't made a disclosure, or are lying and trying to get away with selling traded items on a private account. 

AS above, if people have already properly declared, regardless of their ebay account standing being private or business, then no resources at all are needed to deal with them.

Also, there are so so many grey areas in what's considered trading.  

Very few grey areas, although the bloke down the pub would probably disagree.

It's all a massive minefield 

And as for eBay..... They should have warned or at least prompted me that I was displaying selling patterns consistent with trading.  My PRIVATE eBay account allows for 500 listings a MONTH!!! Where's the sense in that, when you consider they'll report you as a possible trader if you exceed 30 items a year!!!

Most of the responses I have added above, but re your last paragraph.

It doesn't matter what your selling practice 'looks like' the requirement about reporting trading/business income is there in black and white- all of us sellers should already be aware. one of my private accounts has
10,000 limit on quantity of items
£100,000.00 limit

Surely though no one would mistake that with HMRC requirements to register as a business/sole trader? 

The reporting of 30 items a year or more is nothing to do with them thinking you are a business, it is merely a reporting limit. You could be a business with 5 sales a year, or a private seller with 300 items a year. It still doesn't alter the fact that the requirement to declare trading income has always been there, nothing has changed- the only difference now is that HMRC have a scheme to catch out those who are not legally declaring.

Also be aware that it won't necessarily be for just one year, they may want to look at previous years as well to see how long the trading has been going on.

soolin

Or carry on and just put 20% of any profit away for the tax bill.