We used to be known as a nation of shopkeepers but with the High Street hit by a run of high profile store closures, we are fast becoming a nation of Ebay e-traders.
But beware, where there is an entrepreneurial idea the taxman will be lurking to claim their slice of the prize in taxes.
With the recent announcement from HMRC that they are going to target on line traders, will you be on their radar?
So how will HMRC* decide if you are regarded as an e-trader for tax purposes, which means that you will be classed as operating a business upon which tax will be due on the profits?
Well it depends.
If you sell the odd item on Ebay it is likely that you will not be classed as an e-trader. But if you buy items and intend to sell them to make a profit then you will be viewed as a self employed trader.
The best way to assess if you would classed as carrying on a business is to apply the HMRC’s badges or indicators of trading.
The important indicators to be aware of are:
- Is there a profit-seeking motive for your trade?
- Was this a one-off transaction or part of a pattern that suggests trading?
- Does the number of transactions involved indicate that you are trading?
- Does the interval of time between purchase and sale indicate trading – if you buy and sell quickly this is more likely to indicate that you are trading.
- The method of acquisition of the goods can indicate trade e.g. selling a painting inherited from your granny is not likely to indicate that you are trading.
- Were the goods changed to make them more saleable e.g. refurbishing a piece of furniture, which indicate that you intend to make a profit.
If in doubt you should contact your local tax office or an accountant. And finally just be aware that if you are deemed to be an e-trader and you have not notified HMRC within three months of starting to trade then you could be liable to a fine.
*HMRC – HM Revenue and Customs