HMRC Income From Online Marketplace Letter

LITRG

Hello, please find a link to a news article that I hope you will find extremely helpful re how to handle an HMRC enquiry into this type of activity: https://www.litrg.org.uk/news/sell-through-online-platform-ebay-article-must-read. Thanks! 

se2020

LITRG said:

Hello, please find a link to a news article that I hope you will find extremely helpful re how to handle an HMRC enquiry into this type of activity: https://www.litrg.org.uk/news/sell-through-online-platform-ebay-article-must-read. Thanks! 

Useful and interesting article although I don't see the relevance of it in this situation. 

The OP has stated they have only been selling personal items and are not trading.
(Although they may do well to read that article and then confirm they still believe that is the case)

In the article the first description of the individual under investigation says:
"Our client had always held full-time employment and initially began selling items on eBay as a way to earn some extra income."

Now, earing extra income (side hussle, top-up, pocket money,  whatever) is clearly a trading activity and subject to tax assessment. 
This individual clearly set out to trade and has basically managed to plead ignorance/stupidity/compassion/whatever to get the £60k reduced to £9k.

In the op's case, if they are genuinely only moving on personal possessions,  genuinely not trading, and can show this on the balance of probabilities the £60k (or whatever they have been told) will be reduced to £0

RFW

SeekingAdvice1211 said:

Should I consider getting an accountant? 

If you can afford it that's the best thing to do. You need the right one though so worth calling around. Try some small local companies, you may even find some one man bands advertising locally or ask on a local Facebook page for recommendations. It's their busy time of the year so they won't all be very responsive.

SeekingAdvice1211

Thank you for all of your replies so far. 

The amounts involved are not huge, typically around £4,000 - £5,000 a year. I always buy new tech as it’s released so sell my old iPhone, Apple Watch, iPad etc on eBay, it’s easy for the amounts to rack up.

Im not sure what may have caught their attention. I think what may have lead to them sending the assessments was when they had sent the first letter saying we believe you’ve had income from online marketplaces, I didn’t respond to them as at the time my mother was in ill health, and partly as I didn’t believe I had to respond, possibly stupidly, as I was only selling personal possessions so there was nothing to declare. I believe they’ve then just sent the assessments assuming it was all trade income as I hadn’t responded to them. They’d also sent a penalty notice before I’d responded, but they have said they have now cancelled this and will review this again.

They have said in their last email that once they have received my response, they will send the assessments to me again, so they possibly haven’t made a final decision yet. They do however say that they would expect to see a “reasonable sample of receipts/invoices” or the tax would remain. 

Thank you for advising on the badges of trade, I wasn’t familiar with these before this. The only one that I can see that may apply would be the number of transactions. As I’ve always used eBay as an outlet to shift old stuff for years they may see this as “repeated” transactions. I don’t believe my sales history would look like I’ve deliberately set out to make a profit, as it’s quite obvious that the sold prices would be below retail prices. I have sold a lot of clothing, but these have all been of different items and the same size, rather than the same items of different sizes.

Does this definitely sound like it’s an investigation? They did at one point refer to it as a “check” in one of their emails. 

I was going to try and gather as many receipts, invoices, bank statements together and respond to them. However this could be a loosing game as I say it would only be a small amount of the sales I could probably account for. I do think it’s a little obvious that a casual seller on eBay wouldn’t have these from the period they are asking for. Perhaps a better course of action after reading the replies here would be to respond to them reiterating that I am only selling personal possessions, I am not trading. Ask them why they are treating me as trading, and ask which of the badges of trade they believe apply to me?

Thank you again 

soolin

SeekingAdvice1211 said:

Thank you for all of your replies so far. 

The amounts involved are not huge, typically around £4,000 - £5,000 a year. I always buy new tech as it’s released so sell my old iPhone, Apple Watch, iPad etc on eBay, it’s easy for the amounts to rack up.

Im not sure what may have caught their attention. I think what may have lead to them sending the assessments was when they had sent the first letter saying we believe you’ve had income from online marketplaces, I didn’t respond to them as at the time my mother was in ill health, and partly as I didn’t believe I had to respond, possibly stupidly, as I was only selling personal possessions so there was nothing to declare. I believe they’ve then just sent the assessments assuming it was all trade income as I hadn’t responded to them. They’d also sent a penalty notice before I’d responded, but they have said they have now cancelled this and will review this again.

They have said in their last email that once they have received my response, they will send the assessments to me again, so they possibly haven’t made a final decision yet. They do however say that they would expect to see a “reasonable sample of receipts/invoices” or the tax would remain. 

Thank you for advising on the badges of trade, I wasn’t familiar with these before this. The only one that I can see that may apply would be the number of transactions. As I’ve always used eBay as an outlet to shift old stuff for years they may see this as “repeated” transactions. I don’t believe my sales history would look like I’ve deliberately set out to make a profit, as it’s quite obvious that the sold prices would be below retail prices. I have sold a lot of clothing, but these have all been of different items and the same size, rather than the same items of different sizes.

Does this definitely sound like it’s an investigation? They did at one point refer to it as a “check” in one of their emails. 

I was going to try and gather as many receipts, invoices, bank statements together and respond to them. However this could be a loosing game as I say it would only be a small amount of the sales I could probably account for. I do think it’s a little obvious that a casual seller on eBay wouldn’t have these from the period they are asking for. Perhaps a better course of action after reading the replies here would be to respond to them reiterating that I am only selling personal possessions, I am not trading. Ask them why they are treating me as trading, and ask which of the badges of trade they believe apply to me?

Thank you again 

I would have thought a single item of each type per year would be easily proved to them as personal, a techie minded person might reasonably expect to upgrade in that time frame. Was there definitely no more, not a couple of phones extra or more ipads or brand new tech? A history of replacing tech on an annual basis should be easy to show, and start from there. 

As you have shown ignoring the first 'prove it' letter is never a good idea, although I understand why if your mind was elsewhere this might have been overlooked. That refusal to engage is almost certainly why this has turned into a tax bill and possible penalties.

The repeated transaction badge of trade is always a difficult one. Yes I can see it is easy if someone was for example selling dozens and dozens of sets of brand new sealed bed linen (very random example!) but less easy to show a trade if someone is selling off a large collection of anything. In your case showing replacements for the old tech you sell should be a simple way out of this. 

SeekingAdvice1211

Yes I usually update my phone and watch every year as the new ones are released, iPad MacBook maybe every few years. I’ve never sold any new tech items, they’ve all been used by myself then sold on only once I’ve replaced them.

In hindsight now I do wish I had responded to the first letter straight away, as I think things may have been simpler to sort out. You live and learn. 

I have thought of sending them photos of things in my home to prove things like tech have been replaced. Could also show this quite easily with clothing, but not sure how much this would help my case? 

TimeLord1

Payments out to your bank could've caused the issue. Where was it being paid out—to a business account or current account for personal use? And the bank deemed it as trading, maybe. It isn't always the site itself sometimes the banks are acting in their own interests and information gathered.

SeekingAdvice1211

Would never have thought about the bank, yes it was being paid out to my personal account. 

Isn’t this the check there’re doing with lots of people at the moment? I received the usual nudge letter

TimeLord1

They've done their own checks on activities for years and report findings or something they deem as acting within their own interests. But usually they'll write and state, "We believe this account is being misused as a business account." But not always if they suspect suspicious activity.  But there's no way people would have receipts for decade-old stuff; that's standard HMRC rhetoric.

SeekingAdvice1211

I’ve never had anything like that from the bank. 

I’m surprised they’ve asked for receipts, seems a little unfair given how long ago some of the items were purchased. It’s almost like they know they’re asking for something that can’t be provided. 

Thankfully I’ve managed to get quite a few of my old receipts back from the Apple Store for stuff that I did sell during this period. I’m going to send these over to them and ask them why I’m being treated as trading. Hopefully that will be an end to it.