Ebay Business set up advice

clothesline

Hi, I work part time and am thinking of setting up an ebay business hopefully to earn a wage.(I have used ebay to sell unwanted items before). Id like to set it up properly and am worried about getting tax etc right from the start.In a business -expenses are set against turnover to give profit but in ebay do postal charges count as a business expense? What I really need is sources of advice that I can read up on before I start- I want to get the basics right-cant afford to get any debts. Grateful for any pointers to advice sources or any general warnings from ebayers on any problems the business side has unexpectedly presented them with.
Thanks

taxdoctor

Hi Clothesline,

Here's a few things to get you started, if you need any further advice then it's best to talk direct to HM Revenue & Customs (HMRC - the new name for the Inland Revenue) or get the help of a qualified accountant.

Setting up an eBay business is just like setting up any other business. You therefore need to be aware of the tax implications before you start. HMRC are beginning to clamp down on eBay traders who don't do things properly!

You will need to register with HMRC as being self employed, this is done by filling in a form called a CWF1, on it you will state your start date and what trade you will be carrying out. (tip: make sure you do this within 3 months of starting or they can fine you £100 for not telling them in time)

This now means that you will enter into the wonderful world of Self Assessment and will need to complete tax returns annually. (another tip here is to not start until after the 5th April coming up, this means your first tax return will be for the 2008/09 tax year and wont have to be filed until the 31st January 2010).

As you go along you are going to need to keep records of all you income and expenditure. The income is fairly straightforward but what you can and can't claim for expense wise is slightly more complicated.

Generally its money you've spent that was "exclusively and necessary" incurred in the pursuit of your business. So in answer to your question, yes postage and packing costs would definitely be classed as a business expense.

Other examples of business expenses would be any stock you have purchased, a proportion of your Internet and phone bills and there may also be allowances available for using your computer and car etc etc.

You will then pay tax on any profit you have made at the end of the tax year, As you say profit is calculated Income - Expenses - any allowances on capital items such as computers and motor vehicles.

I hope I haven't confused you too much!

If you need any further clarifiaction just let me know.

Brooker_Dave

clothesline wrote: »

Hi, I work part time and am thinking of setting up an ebay business hopefully to earn a wage.(I have used ebay to sell unwanted items before). Id like to set it up properly and am worried about getting tax etc right from the start.In a business -expenses are set against turnover to give profit but in ebay do postal charges count as a business expense? What I really need is sources of advice that I can read up on before I start- I want to get the basics right-cant afford to get any debts. Grateful for any pointers to advice sources or any general warnings from ebayers on any problems the business side has unexpectedly presented them with.
Thanks

Pure Ebay businesses are bad idea, and you will end up depending on ebay, and they can and do suspend accounts with no explanation.

Bye bye business.

Better to start a real business, and use ebay as a way of driving customers to your business.

soolin

Brooker_Dave wrote: »

Pure Ebay businesses are bad idea, and you will end up depending on ebay, and they can and do suspend accounts with no explanation.

Bye bye business.

Better to start a real business, and use ebay as a way of driving customers to your business.

Whilst I agree that ebay is best used in conjunction with your own business website I do not agree that they suspend accounts for no reason. Most of us can stick within the rules, we read and understand them and manage very well. Obviously there will always be those who fail to read and/or understand the terms and conditions of selling on ebay and they do get suspended after a few warnings, but that is good as it protects the rest of us.

Going back to the OP, it sounds like you already have a source of goods, which is brilliant as sourcing goods that can make a profit on ebay is often the hardest bit of the business. Watch your market carefully, watch your competitors as pften when a new player enters a particular selling area they may try undercutting you, even at a loss to themselves to try and force you out. So be prpeared for that and take a longer view.

The taxdoctor has given you good advice. HMRC are also much more helpful than people imagine, I'm only a teeny seller yet I still have a named contact i can call for specific advice . I was even offered free workshops locally where I could go and learn more about running a small business, and how to prepare accounts and such like.

For income under £15K it is very very simple as you don't even need aco!!!!s..just income on one line, all expenses on another and then the net taxable profit. Just remember though to keep all your tax papers, receipts etc for at least 6 years in case they query anything.

taxdoctor

Brooker Dave is absoloutly right, to an extent.

It's akin to putting all your eggs in one basket, eBay is a great way of reaching the masses without spending a fortune on other marketing tools. In an ideal world it should be used as part of a more rounded business plan.

The reality however is that sometimes the costs of setting up and marketing a standalone site/business can often make it unrealistic, especially if the business is meant more as an income supplement than a main focus.

It's a tough one. If going the eBay only route was the only real option then i'd say go for it!

clothesline

Thank-you taxdoctor thats really really helpfull. I want to get it right in the first place and I realise an accountant could help,as soon as I know I can cover stock and fees etc I would certainly use expert advice- I know it usually worth the fees charged but at present my sole income is the part time wage so money is very tight. I would like to start small and iron out any complications, I did try the Inland revenue for advice but everything I wanted to ask about wasnt in their booklet.Im hoping to keep stock at home and work from home initially and this seems to complicate what they consider business expenses.
Thanks for taking the time to help. I will certainly follow your advice.

Brooker_Dave

soolin wrote: »

Whilst I agree that ebay is best used in conjunction with your own business website I do not agree that they suspend accounts for no reason. Most of us can stick within the rules, we read and understand them and manage very well. Obviously there will always be those who fail to read and/or understand the terms and conditions of selling on ebay and they do get suspended after a few warnings

The terms and conditions change (often with little or no warning), and again suspensions can happen without warning.

Obviously this does not happen all that often, but I do strongly feel that nobody should rely 100% on ebay as a host for their business due to the basic lack of true control...

Brooker_Dave

clothesline wrote: »

Thank-you taxdoctor thats really really helpfull. I want to get it right in the first place and I realise an accountant could help,as soon as I know I can cover stock and fees etc I would certainly use expert advice- I know it usually worth the fees charged but at present my sole income is the part time wage so money is very tight. I would like to start small and iron out any complications, I did try the Inland revenue for advice but everything I wanted to ask about wasnt in their booklet.Im hoping to keep stock at home and work from home initially and this seems to complicate what they consider business expenses.
Thanks for taking the time to help. I will certainly follow your advice.

Plenty of accountants will provide a free first consultation, at which you can get valuable advise and be made aware of your obligations before you launch your business.

In theory (mine always has at any rate) a good accountant will save you more than their fees cost, so in essence they're free!

xara

Brooker_Dave wrote: »

The terms and conditions change (often with little or no warning), and again suspensions can happen without warning.

This is true. I sold a few items last year and they ended all my listings early suspended my account and asked for receipts. Which i then faxed. I got the account un suspended. A few weeks later same thing, both times without any warning or message. Really annoying as i had to pay the listing fees anyway and it cut into my profit.

taxdoctor

Brooker_Dave wrote: »

Plenty of accountants will provide a free first consultation, at which you can get valuable advise and be made aware of your obligations before you launch your business.

In theory (mine always has at any rate) a good accountant will save you more than their fees cost, so in essence they're free!

Absolutely! any accountant who

a) won't provide you with some free business set up advice or

b) won't save you more than their fees

is not worth their salt!