How to account for income from eBay sales when listing as a private seller?

theville32

Hi there, I am new to the ebay forum so wanted to say hello first!

I was wondering if anyone can help with the rules surrounding ebay sales as a private seller. I am a "self-employed" photographer and are closing my Studio. Over the last 8 years I have purchased equipment that I will no longer need and are looking to sell this on eBay. There are probably around 30-50 things to sell in total which I hope to sell over the next 3-6 months. However, how do I account for this?

FYI: I always claimed the full price of equipment in my expenses and never did the depreciation route. It always felt too complicated with not having an accountant and doing my own books.

I have read somewhere that when buying and selling equipment, the difference is taxable eg if you sell it for more than you purchased it for eg bought for £100 and sold for £200 - the taxable/income amount would be £100.00. Is this correct?

Are there any limits, before you are classed as a business seller?

To make things more complicated, I am also Vat registered. So I am unsure whether I technically should be adding Vat to any equipment that I sell too.

Any help greatly appreciated. Thanks!

sgthammer

If you've already claimed the purchase price of equipment as an ordinary business expense, then claiming it again to offset the sale value seems like double counting.

se2020

As you claimed the full expense of the items against tax when you bought them for the business then you will be liable for capital gains tax on the value you sell them for.

Hmrc will accept ebay sales prices as 'true and fair value'

If you are a basic rate tax payer the capital gains tax is 18%, or 24% if younare higher rate.

As these are business assets then you would be selling them as a business seller. Once sold you would add the values up and input this in the 'value of disposed assets' on the appropriate tax return. Any postage costs, packaging etc can be entered in the return as cost of sales.

There are certain tax reliefs available, they generally only apply if you are closing or selling the business but even if you are going to continue trading it would be worth reading up on them if it's a particularly high value of items.

You should also register on ebay as a business seller although this will create a new account with zero feedback so you may want to sell a few low value/low risk items first to build the score up so you can attract better prices for the better items.

If you have a personal ebay account with good feedback you CAN change it to a business account but you CAN NOT change it back again.

If you don't do much personal ebay selling then you could change your existing account and open a new personal account for purchasing if required.

Or you could sell the business items through your personal account. This is generally frowned upon by other ebay business sellers (as the fees are lower), and it is also against ebay rules (although they don't seem to enforce that rule at all)

Providing you set up your returns policies to follow consumer protection rules its not actually illegal to sell business items on a personal account though.

However, an ebay business account will attract ebay fees and postage costs. You will be able to reclaim those costs at your marginal tax rate for the year. Ie, if you are a 20% payer you will pay 18% tax on sales but be able to reclaim 20% on the selling expenses so you will be slightly better off than using a private account (as the buyers pay the ebay fee)

Regarding the vat, ebay do not let you add vat to listings/sales. It has to be included in the price.

So if you sell a tripod for £120 you deal with it the same way as if you charged me £120 to take a photo of my dog and hand £20 over to the vat man.

Again, there are various rules/reliefs on this depending if you paid vat on the item in the first place, if it's a vat exempt item and so on.

se2020

PS, regardless of ebay account type there are no 'limits on business sales'

You can sell as much or as little as you like.

If you sell over 30 items or £1700 worth in one year then ebay automatically report the figures to hmrc.

dinosaur66

i would sell them on your local marketplace if you are in a quite high density area

niche items / quite high value and just take cash in hand

an ebay shop just for these few items is not worth the hassle

self employed so your used to keeping accounts just register the sales when they sell on marketplace and no fees

i have had people from kent come to collect from me in essex on marketplace large items i do not want to post on ebay/ i have also collected large items from kent that i wanted so 60 square mile from your house will encompass a lot of people

theville32

https://forums.moneysavingexpert.com/discussion/comment/81883075#Comment_81883075

Hi se2020, thanks so much for your post. It was very helpful and informative.

I think the easiest option for me is to keep the personal eBay account, as it will only be this small bunch of equipment to sell over the next 1-6 months. With that in mind, how would I setup my listing returns policy to follow consumer protection rules?

"Providing you set up your returns policies to follow consumer protection rules its not actually illegal to sell business items on a personal account though".

With regards to the Vat situation, if I bought some of the equipment as a Bundle for very little and was charged Vat on it, does that mean I have to include vat in the sale for any of these items (despite them not been listed or identified in the bundle)? These items were purchased in 2017, so it is actually hard to find the original invoices for them.

Thanks again for all your help on this matter.

se2020

https://forums.moneysavingexpert.com/discussion/comment/81884740#Comment_81884740

Most consumer protection rules are covered under the ebay terms themselves,

Aside from the ebay standard stuff, You need to accept returns on all items for any reason (and give a full refund) (this is just ticking the box that says 'accept returns'

You either need to state the buyer is covering the cost of return on the listing or reimburse the return postage.

You need to provide your business address (including it on the postage label is enough)

You need to provide a vat receipt to any businesses that purchase from you (stating 'vat receipt provided on request' in the listing is fine)

Regarding the vat situation,

If you reclaimed vat on an item when you bought it,

Regardless of what you paid for the item you will have to charge vat when you sell it.

You can not add vat to ebay sales, so, a buyer may pay £120 for the item 'all-in'

You will have to account for each item ie, as if that one sold for £100+vat.

You don't need to charge vat if you bought it from a seller that was not vat registered and you didn't reclaim any vat.

If you bought second hand equipment and didn't reclaim vat on it then you can use the margin scheme and only pay vat on the difference between purchase and sale price.

If you don't have receipts (or only have one receipt for a bundle of items) then you need to estimate the price of the items and be prepared to defend that valuation if hmrc challenge you on it.

An easy way to avoid any questions over the valuation would just to be re-sell the bundle as you bought it.

martindow

As you are VAT registered you should be charging VAT on all of your sales. You will normally be selling to individuals so the price you show on eBay will be the gross figure including VAT. If you sell something for, say, £12, that is the price the buyer sees and pays. For you that is £10 + VAT.

theville32

https://forums.moneysavingexpert.com/discussion/comment/81885568#Comment_81885568

Hi martindow, thanks for your message. Am I right to assume that Vat would be charged for only business related equipment? Anything that was personal would not require Vat to be included and charged? Thanks

theville32

https://forums.moneysavingexpert.com/discussion/comment/81884860#Comment_81884860

Hi se2020, thanks so much for your posts. They are very informative.

With regards to this comment below: "If you bought second hand equipment and didn't reclaim vat on it then you can use the margin scheme and only pay vat on the difference between purchase and sale price".

Am I right to assume you would say on the eBay listing that you were charging Vat using the 'Vat Margin Scheme'. Then you would provide a Vat invoice (if requested) with Vat charged on the difference between purchase and sale price eg if the difference was +£500, the Vat charged would be £83.33?

Thanks!

savergrant

https://forums.moneysavingexpert.com/discussion/comment/81889948#Comment_81889948

If you use a margin scheme you must not give a VAT breakdown to a purchaser and the VAT collected cannot be reclaimed by a business purchaser, so it is far more attractive to a private buyer than to a business buyer.

Any invoice should say 'VAT margin scheme applied'