HMRC Is After Your Sales Money

[paul2510]

As we all know, HMRC now wants a slice of your side earnings from sites like this. They think that some sellers are masquerading as private sellers instead of business sellers and are therefore trying to avoid paying tax. There has been a lot of misinformation surrounding this whole scenario regarding what you are allowed to earn in any one year. Apparently if you earn under £1,000 after deducting fees and commissions or taxes, it doesn't affect you, but if you earn above the £1,000 trading allowance, HMRC will want their slice. Even if you make no where near this in money but complete 30 sales, HMRC wants to know about this too, so either way they have you over a barrel. If you are selling unwanted possessions that have been lying around your home, such as the contents of a loft or garage, you will not need to pay tax. However, if you sell these items for more than you paid for them, you may have to pay capital gains tax, but only if you exceed £6,000. It seems HMRC is going after the small fish and ignoring the ones who do not pay any tax or hardly any, i.e., Amazon, Vodafone, and so on. What they can't get from them, they want from sellers on these platforms. Welcome to Tory Britain.

[goldenwonders]

... you may have to pay capital gains tax, but only if you exceed £6,000. It seems HMRC is going after the small fish and ignoring the ones who do not pay any tax or hardly any, i.e., Amazon, Vodafone, and so on. What they can't get from them, they want from sellers on these platforms. Welcome to Tory Britain.

Can I just point out to you and any other readers your post is accurate, but the capital gains tax allowance is being halved next year (£3000, I think from April) and will then drop to zero in coming years.
At that point the HMRC will be able to tax you on ANY profit you make even if you sell your own second hand goods, clothes - whatever.

The best piece of advice I would give to all sellers is to keep a record of what they sell, date sold, what it cost them originally and show if there was a profit or a loss.
Should HMRC come to you and you don't have these, they have the right to make an assessment of what you 'earned' and tax you accordingly! Remember they are like the Post Office, they don't have to prove anything - it's up to you to disprove it!

As for blaming the Tories, yes their idea but if you think the Labour party will be any different - dream on, they will also be in dire need to raise funds to pay for the daily kayak invasion! ...and everything else they promised to give you.. LOL

[theElench]

I'm sorry, but I have to contradict you. @Paul2510's post is NOT accurate.

On-line selling sites will have to report sales by all sellers annually to HMRC if they sell more than 30 items or 2000 euros in value (approximately £1700 over the year.

If the seller is registered with HMRC as Self-Employed and declaring their on-line earnings, they can claim the £1000 "Hobby Trading Allowance" which will exempt the first £1000 of Turnover (not profit) from taxation.

Below those thresholds, nothing will be reported to HMRC.
Above them and HMRC will look closer.

If a seller is selling (for example) 50 pairs of new shoes in various sizes, especially for several years, they will probably get in touch.
If a seller is selling personal (used) items even in quantity they might get in touch but should be satisfied with an explanation such as selling a collection or an inheritance.

The main aim of this reporting is to catch those involved in criminal activity, money laundering, fraud etc., including Tax Evasion by businesses selling as private individuals and not declaring their profits for tax purposes. Figures from 1/1/2024 will be reported to HMRC in January 2025. Presumably, although not explicitly stated by HMRC, if they find evidence of Tax Evasion in 2025, they will then look back at previous years sales and previous Tax Returns to see what was declared and if they match-up.

[theElench]

Just add to the above.

My examples in para. 5 could be mis-interpreted to mean that selling "New" goods would interest HMRC, but selling "Used" goods in quantity would not.

There is only so much that HMRC is going to believe is a collection or an inheritance. Quite where that line is or how a seller can prove that they are not trading is unclear. My advice is the same as @GoldenWonders says -- keep any receipts you have for past purchases or even old photos if they show items that you sell.

[goldenwonders]

Morning Dave, I can't see anything he has said that is incorrect?
I think you have added to the post again correctly stating that 'On line sites will have to report details of seller who make more than 30 sales or sales of value over £1700' again all correct.

It is indeed difficult to define exactly what HMRC will make of each individual case for 'who is trading and who is selling off their own items'?

The only real pointer is - "If you buy to sell" - you are trading and therefor should declare income for taxation.

I have always kept a record because where tax begins and ends is complex and regardless of 'ignorance' you will always be deemed to be at fault and pick up the tab.

Keep a record - Sales Item, Cost or where it came from, Sale Price, Costs postage packing etc. show was it a profit or a loss. Total your profits for a year and keep these records for up to 8 years.

Should HMRC ask for information and find fault, they have the power to go back 8 years. They will make their own assessments of what they believe is true should you not have any figures to show them.

With regard to £1000 allowance - I believe that was once called an entrepreneurs allowance and was introduced by George Osbourne - a Tory.

[Stnenopmoc]

What is a profit? If you bought something 8 years ago and it sells for a bit more than you bought it for, is inflation taken into account?

Also what is a loss? Is depreciation taken into account and if so what about sales 'fads' where people buy old rubbish that should be binned because it's a trend and you are lucky to have one lying about and sell it for far more than it's worth.

Then there is the more intersting areas, selling your home, car, boat, antiques that decorate your home, etc. All bought long ago for next to nothing by comparison to todays values now selling at a vast price. Is that profit also taxed if it is sold on line ?

Lastly what about the older people who are downsizing. Those who have paid tax on wages to buy things, then vat on the purchase, then this tax, the total tax may actually come very close to the price of the goods sold, even though they have a lifetinme of depreciation.


just a thought

[goldenwonders]

As I say taxation is complicated, I'm no expert, but do have an accountant and because I've been self employed know more than the average person about tax.

Each transaction can be very different, eg. if you sell a boat and make over £6,000 profit you would be liable for a capital gain and pay tax on all profit over the £6k. A house is different, as long as its your prime residence - no tax is payable. If you are selling a car no tax is payable as its seen as a depreciating asset. I believe you can sell up to 3 cars a year after which you are seen as a business and liable for taxation. Classic cars are again different.
Antiques again are liable for capital gains tax. However I believe paintings and art are not?? BUT if you create paintings and sell for a profit - you are liable for tax. There are endless little anomolies to be aware of - but as I say I'm no expert.

I even found out - (I think?) gold sovereigns are not subject to capital gain, however a gold krugerrand is! That's because - sovereigns are coin of the realm - krugerrands are not.

Finally, age is not a get out of paying tax - they tax you when you're alive and will tax you when you're gone on anything above a certain amount, so it can't be passed on easily - again I believe allowances are not going up so effectively taxation is getting higher as cost of services increase. I even pay tax on my pension because I still work and have other income - thank God!

[theElench]

Very briefly, I have an appointment.

The £1000 (Trading Allowance) only applies to those registered with HMRC as Traders, not to anyone else selling their possessions.

[paul2510]

Not according to HMRC. They are stating that if you sell more than £1000 then you need to register for self assessment as self employed and submit a tax return declaring the self employed turnover and expenses as well as the rest of your world-wide income and capital gains (taken from their website). I know Ebay are going with €2000 or £1,740 as I have spoken with them an Etsy are staying with the £1000. Either way HMRC will eventually reduce that figure so that they can still get their slice. I don't imagine Labour will change anything if they ever get in to power.

[theElench]

@paul2510

I can only say I'm sorry to have doubted you.

I confess I haven't looked at the HMRC website since I retired from Self-Employment and filing Self Assessment Tax Returns. On doing so I made sure that all my income was covered by PAYE for simplicity.

It still seems inconsistent and confusing that HMRC seems to be using two figures, one for self-employed people and another for everyone else? Even different on-line sites are apparently using different figures, from what has been said above.

Leaving aside Capital Gains Tax (only because I can't imagine that many sellers are going to risk selling something of £6000+ on an on-line platform), I think that the question of profit or loss is going to be a can of worms. I sell (mostly) stuff I stored during my move out of London in 1986, much of it bought (second-hand) for (say) 5/-. Should I sell such an item for 25p to avoid any suggestion of profit?

The question of length of ownership as opposed to buying something last week to sell this week for a profit is area of with difficulty. How does anyone prove how long they've had something, unless they had the foresight to keep a receipt, in my case 30-40 years ago.

And yes, I agree with you that the 30 items and £1000 thresholds are only a starting point which will be whittled away with time. Like VAT that I think started out 12'5%(?) or Insurance Tax that started at 2%(?) or even NIC that started at 2.5%(?).

One good thing that this measure will very likely bring about is my finally dumping obay. I can see that having been selling on both sites for about 10 years will, to HMRC looking to find 'suspicious' selling activity, put me in their sights. The reality is that these days I sell more on Ebid and obay is a waste of time. So, again for simplicity's sake, it will look better to confine my selling to the stronger site.


@goldenwonders.

I seem to remember the same thing about Sovereigns from when I collected coins. They are coin of the realm with a nominal value of £1. You might remember a Tax Avoidance scheme some years ago where some employers paid employees in Sovereigns, taking them under the PA threshold so no tax payable, (Quickly stamped on by HMRC).
Krugerrands were counted as "Bullion" coins and an investment so taxable.