HMRC scrutinising online traders

HMRC are scrutinising online traders.

lashmars ebayThousands of online sellers who use websites such as eBay, Amazon, Etsy and Gumtree are currently the focus of HM Revenue & Customs, who continue their efforts to crack down on tax evasion.

Using extensive new powers introduced last year, HMRC can download people’s account information and use it to target online sellers who may not be paying the tax they owe.


HMRC’s renewed focus on online sales follows a similar campaign in 2012 when more than £9m in tax was raised, with one eBayer who turned over an undeclared £1.4m in six years handed a two year prison sentence.


So who might this affect?


Many of us in Lymington sell things online, from children's paraphernalia that's no longer needed, to items handmade at home. HMRC maintain they are looking for the ‘big fish'; that anyone just selling the occasional item has nothing to worry about. However it is a grey area; there is no clear definition where you drop off from selling some old clothes at a car boot sale to becoming a trader. At what stage does a ‘hobby’ become a business? 


There are 3 main indications that you you are a trader (and consequently are required to fill in a tax return…)


1. You’re making a profit.

If HMRC thinks you intended to make money, rather than selling items for fun, your selling activity is considered to be a business.


2. You’re selling a lot

The number of transactions matter. If you repeat very similar transactions in a short period of time, this might be considered a badge of trade.


3. You’re adding value

If you modify items before selling them, again this is a badge of trade. Ask yourself: do you repair, alter or improve items to make them more saleable and, therefore, achieve a greater profit?


There are of course other elements in the equation: the type of goods; how the sale is carried out (a fixed price sale could be classed as ‘undisputed trade’ more than an auction for example); if you borrowed money to purchase items (especially if this loan could only be repaid by selling the item(s) again); the period of time between purchase and onward sale and how you acquired the item.


If you have any concerns or queries on this matter, please get in touch. It is better to be safe than sorry! The team at Lashmars Tax Accountants are here to help.


Peter Lashmar

© Lashmars Tax Accountants 2015.

This communication is intended to provide general guidance on matters of interest and you should not act or refrain from acting upon any information contained in it without seeking appropriate professional advice.



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