eBay traders come under scrutiny from the tax man

The Inland Revenue has begun a well-publicised crackdown on self-employed dentists, medics, builders and plumbers who it believes may be avoiding or failing fully to declare tax owed. As a consequence, tax experts say that their next target of HMRC is likely to be people who make money from online businesses like eBay and are failing to declare their earnings or pay tax on their profits.



“HMRC will go for the softest target because they need the money,” says tax expert Patrick Harrison, partner at accountant PFK. “They are trying to use their limited resources as best they can and use software to yield information about trading online. However, it is one thing to identify the tax due, and another to get someone to pay up, so they have to have a reasonable chance of collecting the money off the person they have identified for them to pursue a claim.”

So what is the tax position of selling new and second-hand goods online, and what tax will you have to pay if you sell on your second hand goods?

“Running an online business via a site like eBay is no different from self-employment,” says Harrison. You are required to keep records of income and expenditure and declare profits for tax. Your business could come in for VAT issues if it reaches the turnover registration threshold of £73,000 (in tax year 2011). “

If you are selling your own personal goods infrequently, then you do not need to declare profits or register your activities as a business – it is largely a question of scale. Harrison says: “Someone who is buying and selling regularly to make a profit would fall into the tax net, and you need to tell the Inland Revenue that you are running a business within three months of starting it. If you are selling your own personal goods then it does not qualify as a business.”

Article Source: http://www.money-marketuk.com/index.php?option=com_content&view=article&id=1778:ebay-traders-come-under-scrutiny-from-the-tax-man&catid=72:consumer&Itemid=320