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Ebay traders: One-off sales or a taxable business?



July 4 , 2012 | Posted by Fern Price |

Ebay traders: One-off sales or a taxable business?

“Oh no! Who ordered 500 boxes of those floor tiles, John?”

Business owner Max Badger isn’t a happy bunny.

“We only needed 50. How am I gonna get rid of those now, we’ll have to sell them on ebay I suppose. We can’t afford to make a loss that big. We’ll never sell all of them in the shop.”

“Here…Derek,” says Mandy to her husband. “Why don’t you get rid of some of these DVDs, you’ve got loads of them and you hardly ever watch most of them anymore.”

Max sells his tiles for £20 profit per unit and Mandy makes a good £200 from 50 of her husband’s DVDs; Max is a fully-fledged e-bay trader and Mandy is just making a quick buck to raise some extra cash.

Max is also subject of a campaign by HMRC directed at e-marketplace traders.

But just where exactly do you draw the line between what is a one-off sale on ebay for a swift personal, financial gain – and a nice little sales earner which brings in a healthy profit?

As the popularity of online buy and sell sites like ebay has risen, so has the attention of HMRC to e-marketplace traders. That is, anyone selling regularly for profit in an online marketplace.

Just as a fruit and veg seller buying in goods at cost price and selling to the consumer for a small profit per unit has a taxable income, so do those selling goods at a mark-up price.

Early last month, HMRC announced an amnesty on those willing to own up to making such profits from e-marketplace trading. They estimate that as many as 30,000 people are not paying enough tax for selling online.

Key questions – am I trading through an e-marketplace or not?

If your activities through e-marketplaces fall mostly into column A it’s likely that you are trading; if your e-marketplace activities fit more neatly into column B there’s probably no need to worry.

I buy goods to sell on again at a higher price The goods I sell online are unwanted personal possessions
I sell goods regularly through e-marketplaces – several times a week, if not more frequently I only make one sale, very occasionally
I’m registered as a business seller on ebay I’ve had the goods I sell lying around my house for quite some time
I alter or modify goods to make them more saleable – and then sell them on for profit The goods are not related to a trade
I sell goods through an e-marketplace which are related to my trade offline

Based on the fictional scenarios at the start of this article, it might seem like a fairly straightforward task to decide if your activities fall into the realms of trading.

But with every person’s e-marketplace activities differing greatly, the lines can become blurred.

If in any doubt as to whether or not you are trading, you can save yourself an untimely or unwanted tax bill – and give yourself piece of mind – by seeking professional advice.

As HMRC’s e-markets Disclosure Facility is now closed, reduced penalties are no longer an option for those who are trading through e-marketplaces.

  • Online accountancy services such as e-ccountant are able to provide fast, hassle-free advice on e-marketplace trading and the tax implications, wherever you are in the UK. Visite-ccountant.co.uk or call 0800 0029543.