HMRC and Ebay - New Rules come into play

[Gridiron]

Just to chip in on this one, and I would suggest reading a my recent post in the Hattons thread below. 

 

Whilst this dealt mainly  with the reason why GST or VAT is being added, the principles behind are the same as this Ebay selling. I suspect the main target initially of this Ebay etc legislation will be traders registered for UK VAT so they can easily verify that their online sales are reflected fully in their trading accounts to ensure that the correct amounts of VAT and Corporation Tax are being declared and paid. This is most likely will affect the Chinese and US companies that operate entirely through fulfilment organisations like Ebay and Amazon who are legally obliged to carry out due diligence on these none resident entities. On a plus side it could lead to crackdown on substandard goods.

 

As far as individuals are concerned, if they are registered for VAT then legally then they will be treated as sole traders and will have to make sure they declare their Ebay income as part of their taxable income, and the make sure it matches Ebays's records, as well a provide records of any purchases. Thus buying items at a car boot sale for cash without a receipt and then selling it on line through a VAT registered trader will potentially leave the trader liable for tax on the full value of the profit. 

 

For the vast majority of private sellers (ie not UK VAT registered) on Ebay I suspect HMRC will only be interested were the income from sales is probably well over the GBP1000.00 mark and is sustained and could provide an additional income. Now this is were it may get tricky because Ebay will only be able to supply a name and address and contact details, so potentially HMRC are going to have match millions of Ebay traders with National Insurance numbers to ensure they are taking action against the correct party. I guess they could do it with AI technology eventually but they will also have to decide whether the cost of collecting the taxes is viable which also makes me think the limit could be raised over time.     

 

One other aspect to consider, if you were moving residence to the UK from a third country, you would not normally be liable to UK customs duty and VAT  (alcohol/wines/spirits etc excepted) if you purchased and used the goods more than six months before the transfer of residence takes place and can provide the evidence to show this. I suspect the same principles may be applied to private traders on Ebay but I have not seen any evidence to support it, but it would do no harm to retain your receipts.     

 

   

 

 

 

 

[Mike Bellamy]

About 40 years ago, when we started the Derby Exhibition, local press publicity and an interview with our exhibition 'manager' (organiser) led to him receiving a letter from the Inland Revenue (as it was called then) asking how much he had been paid to organise the show !  Of course it was all voluntary and so they asked to see the accounts for the event and the accounts for the model railway club. This resulted in the club having to pay tax (corporation tax ??) on the bank interest which we had received gross without tax deducted by the bank. We did however manage to get them to accept that the 'profit' was used by the club to pay rent and build layouts etc. We had followed the example of others by having 'day membership' written into our rules (now a much more detailed constitution) and I sent them a photocopy of a ticket issued to one of our members who had been to a show at Harrogate as the ticket actually had printed on it 'admittance by payment of a day membership in accordance with the rules'. The Revenue accepted this, and somewhere in the loft in my old club records, I still have their letter confirming that we could use what they called 'The Harrogate Example' as income from your own members is not taxable. We did have to continue paying tax on our interest for another 10 or so years until we were told that as it was such a low and trivial amount, we could stop completing tax returns.

 

Something else to mention from personal experience - HMRC are automatically advised by banks and building societies about the interest you receive - going back 50 years now to when I started at Lloyds, one of my jobs was to manually complete a form for every customer who had received any interest above a specified limit so that they could check if tax was payable as when added to other income etc, the customer may have gone over the taxable income limit. It took many weeks to do this and was eventually automated - but by that time I had progressed to the counter as a cashier !

.

[Sjcm]

I was speaking to a friend of mine who is a bookkeeper yesterday and he has no idea how it will pan out. He sold well over the limit last year getting rid of personal items like childhood collectables  so he was  interested .. He had no way of proving he's had them for 40 years in the loft rather than a car boot find the week before so he was pleased it was last year!

 

I'm personally going to keep under the 1000 limit until I see what happens. The problem is its the equivalent of announcing a police speed check a month before it happens, so everyone miles over the speed limit on ebay will have left/gone legit. Political/internal pressures means this has to be seen as a success so barring a few idiots who will they catch? As Hal Nail said the onus is on you to prove you aren't fiddling, not for them to prove it, so if they start going after the "prove you arent"  Ebayers we'll soon know from the media.

[RichardT]

1 hour ago, Sjcm said:

so barring a few idiots who will they catch?

They’ll catch commercial dealers (in all goods) who are dodging tax by selling on eBay from a private address and pretending to be casual traders. As everyone has pointed out above it’s not aimed at private individuals selling unwanted personal possessions.  Where I agree with the wibble is that the £1000 pa sales revenue trigger is too low - evidence that HMRC don’t understand what hobby items cost. Dispose of some unwanted O gauge locos plus a Dublo limited edition (the kind of thing a collector would do to upgrade or thin out a collection) and you’d hit that quickly in several years. As others have said, I’d expect that limit to be raised to £5k or so pretty quickly once the volume of paperwork becomes clear to HMRC. And if they don’t - it’s an election year: complain to your MP about it. Raising the limit would be a practically cost-free pledge to make for vote-seekers!

Richard

Edited January 4 by RichardT
Punctuation

[Sjcm]

2 minutes ago, RichardT said:

They’ll catch commercial dealers (in all goods) who are dodging tax by selling on eBay from a private address and pretending to be casual traders. As everyone has pointed out above it’s not aimed at private individuals selling unwanted personal possessions.  Where I agree with the wibble is that the £1000 pa sales revenue trigger is too low - evidence that HMRC don’t understand what hobby items cost. Dispose of some unwanted O gauge locos plus a Dublo limited edition (the kind of thing a collector would do to upgrade or thin out a collection) and you’d hit that quickly in several years. As others have said, I’d expect that limit to be raised to £5k or so pretty quickly once the volume of paperwork becomes clear to HMRC. And if they don’t - it’s an election year: complain to your MP about it. Raising the limit would be a practically cost-free pledge to make for vote-seekers!

Richard

But they would have stopped in December surely? I agree it may persuade people on the fence between private selling for extra cash and going full time to go legit so will generate more tax but actual catching of tax evaders. And they talk about people with a side hustle which is not really dodgy commercial dealers imo.

 

[Pteremy]

I don't think that any railway modeller or collector who happens to do a bit of buying and selling online has anything to worry about.

 

These days tax investigations are largely driven by data. That could mean the data listing everyone who, for example, invested in a particular avoidance scheme. Or, as here, it means mining a pile of data to identify potential non-compliance. So they will be primarily looking for a scale of activity that indicates an undeclared business. 

 

Yes, technically, if you buy things with the specific intention of selling them on at a profit then you are trading. But if that is what you do, and you do it on a regular basis, then you know what you are doing - making money not modelling/collecting. And that is quite distinct from someone who, say, actively curates their model collection and occasionally sells items that are no longer required. 

[roythebus1]

On 02/01/2024 at 19:42, NBL said:

Utter boll0cks

I'd say not, back in the 1970s I ran a mobile disco as well as working, taxman decided I owed tax on £25k disco income. Until the accountant listed the records that depreciate to zero the minute they're played, the stage clothes, special hairstyles, glitter shoes, phone bills, use of home..I got a good tax refund that year via my employer.

[roythebus1]

It may also capture the likes of my partner's ex-hairdresser who worked from home who always had a room full of new clothes she'd sell on ebay. I suspect the clothes had shall we say fallen off a lorry as there was so many of them. she lived a lavish lifestyle as well, tea at the posh hotel on The Strand, 3 holidays a year in spain...

[andyman7]

1 hour ago, Pteremy said:

I don't think that any railway modeller or collector who happens to do a bit of buying and selling online has anything to worry about.

 

These days tax investigations are largely driven by data. That could mean the data listing everyone who, for example, invested in a particular avoidance scheme. Or, as here, it means mining a pile of data to identify potential non-compliance. So they will be primarily looking for a scale of activity that indicates an undeclared business. 

 

Yes, technically, if you buy things with the specific intention of selling them on at a profit then you are trading. But if that is what you do, and you do it on a regular basis, then you know what you are doing - making money not modelling/collecting. And that is quite distinct from someone who, say, actively curates their model collection and occasionally sells items that are no longer required. 

As I've been doing my usual January trawl of what I can probably do without I can give a good example of this - I've just dug out a Dapol Class 22 from the original release, bought on preorder and run a few times but kept immaculately in its original box. Like quite a few people, I own much more stock than I actually need for any operating and have a predilection for 70s diesels. A Class 22 is a bit early for my favoured period of operation and out of region but it is an interesting model.

These first releases had a very 'odd' shade of BR Blue and this model was 'one day' going to get colour corrected and weathered but Dapol have recently re-released the model with a better finish and upgraded lighting with separate front/rear control of lights which is an important operating feature for me, so this is a model I intend to 'move on'. Of course it only takes me to clear 10 or so modern superdetail locos and my sales figures are big enough to make their way to HMRC. HMRC would be able to see that I have a normal job and PAYE tax payments but let's just say they send me a letter 'checking' that I am declaring everything.  Now it happens that I have a habit of keeping receipts in the boxes of the items I buy, so I can see that I paid £125 for this item on 16 December 2011. Not only am I unlikely to get this sum back but the fact that I have owned this item for 12 years pretty much demonstrates 'private ownership' rather than 'trading'. So I have evidence that I can meet the broad tests for (not) trading, but I'm certainly going to be noting it down from this year.

 

Edited January 4 by andyman7

[Andy Hayter]

3 hours ago, RichardT said:

 Where I agree with the wibble is that the £1000 pa sales revenue trigger is too low - evidence that HMRC don’t understand what hobby items cost. Dispose of some unwanted O gauge locos plus a Dublo limited edition (the kind of thing a collector would do to upgrade or thin out a collection) and you’d hit that quickly in several years. As others have said, I’d expect that limit to be raised to £5k or so pretty quickly once the volume of paperwork becomes clear to HMRC.

Richard

 

The flaw in the thinking Richard is that if Ebay have indeed been feeding this information to HMRC for a number of years, they will already have a very good idea of the work it will generate.  

 

I doubt that this info will be used alone but will be used to data profile individuals who are likely to be avoiding paying tax on their incomes.   So someone with low declared income, high Ebay turnover, a profession that lends itself to cash in hand payment, perhaps a large demand on government subsidies and who perhaps displays a standard of living above what the tax return would indicate for example, might well attract more attention than say someone who pays a "reasonable" amount of income tax and happens to have acquired 1001GBP in Ebay income.  

 

The analysis will be done I am sure by computers and not individuals and a hit list of likely tax avoiders generated by the number of red flags raised by the computer analysis.  Having just one flag due to Ebay sales is unlikely alone to raise concern but might just raise an automated letter.

[AY Mod]

4 hours ago, RichardT said:

I’d expect that limit to be raised to £5k or so pretty quickly once the volume of paperwork becomes clear to HMRC.

 

That is very unlikely to happen as the scope of this rule (which has always had the onus on the seller to report rather than the sales channel being compelled to inform) which permits anyone to earn up to £1k of additional income without the need to complete a self-assessment and pay tax on that amount if you are earning above the current personal allowance.

 

They wouldn't want increase that threshold.

[RichardT]

2 hours ago, AY Mod said:

 

That is very unlikely to happen as the scope of this rule (which has always had the onus on the seller to report rather than the sales channel being compelled to inform) which permits anyone to earn up to £1k of additional income without the need to complete a self-assessment and pay tax on that amount if you are earning above the current personal allowance.

 

They wouldn't want increase that threshold.

Yes, fair enough. The data matching point made above is the key thing. Either way, it's aimed at undeclared professional traders.

 

Richard

[johnofwessex]

Interesting comment here

 

https://www.taxresearch.org.uk/Blog/2024/01/02/why-wont-uk-politicians-address-the-biggest-part-of-tax-evasion-in-the-uk-which-is-caused-by-the-absue-of-limited-liability-companies-due-to-poor-state-regulation/

 

From a Chartered Account and & NG Modeller

[muddys-blues]

I wonder what Gostude thinks ??? 🤠

[andyman7]

Gostude is already registered as a business seller on ebay

[Sjcm]

The other thing is its April to April for tax, so if you sold 450 pounds of stuff from Jan-April 2024 could they theoretically look at that on the basis you could be over the limit for the whole tax year beginning April 23?  Or is it strictly starting Jan 2024-Dec24 where ebay have to inform them of a seller going over the 1735 or 30 item's limit for that calender year?. There's obviously this gap between the April to april 1000 tax allowance you receive where above that they could theoretically accuse you of trading and the 1735/30 items jan-dec figure where EBay have to inform them. It's all incredibly vague unless someone on here knows more?

[woodenhead]

This is because if you had to declare anything for the year ended March 24 then it would be after April 24 which is where you complete your self assessment for the previous financial year.  i.e. you do your tax return after the end of the tax year not during it with self assessment.

 

So by starting the reporting period officially in January 24 it means that the tax office will have been informed of your activity for the whole financial year and you can expect a letter if you're on their naughty list if you don't do a self assessment or miss them off one.

[Sjcm]

Ah so I would be under the 1000 tax allowance where I would have to inform them from April 2003 to now. Thank you👍

[woodenhead]

1 minute ago, Sjcm said:

Ah so I would be under the 1000 tax allowance where I would have to inform them from April 2003 to now. Thank you👍

From what I understand (from this thread) Ebay has been supplying information to HMRC for a few years, it's just become officially required from now and it's expected that you will declare stuff in your self assessment or risk the consequences if you do have a sizable side hussle using the gig economy but are avoiding tax.

 

So they already know what you've been selling (and for several years), but I guess I don't need to worry because I am only ever offloading my own possessions and would simply say that if challenged because I had exceeded the threshold.  Not that I am doing much presently and if I do it's not going to exceed the threshold. 

 

I pity people who model O gauge, won't take much to go over the top.

[Sjcm]

Yep I buy and sell occasionally just to save money. Why buy a loco for 30 pounds when you can get the same loco and others for 60 pounds and move the others on? I'm not over the threshold so if the worse came to the worse I wouldn't have the hassle of proving  that I sold something I've had for donkey's years or indeed sold something for a friend like I did last year

Edited January 5 by Sjcm

[Phil Parker]

Some useful information from Martin Lewis:

 

https://www.moneysavingexpert.com/news/2024/01/online-platforms-etsy-vinted-airbnb-report-hmrc/

[woodenhead]

And also this HMRC page - it does give an example of models where tax could be due

https://www.gov.uk/government/publications/selling-online-and-paying-taxes/selling-online-and-paying-taxes-information-sheet

 

And there is a self checker here to assist as well

https://www.gov.uk/check-additional-income-tax

 

Basically, if we are offloading trains we no longer want but were personal possessions (i.e. not bought with intention just to sell on) then we are not likely to be liable for tax though there may be exceptions to that rule so follow the gov.uk guidance if unsure.

 

People who bought lots of Accurascale or other limited edition models in the hope of selling them on at a profit (you know the types of seller these are) are going to be finding themselves in an interesting situation going forward.

Edited January 5 by woodenhead

[Sjcm]

well I'm definItely going to have a rest till after April😂 The trouble is its all about interpretation isn't it or more accurately yours vs HMRC.  the example on the HMRC site is a good example.

 

Sally clears out her attic and decides to sell her unwanted items online. This is a one-off activity for Sally, and the items sold are for less or the same as the original purchase price.

 

well if its not one-off because you building a new lay-out and you're flogging the old lay-out items and loco's as you go? And technically there's a good chance you could get more for a loco on ebay than you paid 10-20-30 years ago. Taking it to its ridiculous extreme, if you had a load of mid-70's loco's you're guaranteed to get more than the original purchase price.

 

 

 

 

 

 

Edited January 5 by Sjcm

[Talltim]

On 02/01/2024 at 18:51, YT-1300 said:

I think you've been on the mushrooms, speaking from experience of working for HMRC in the past.

 

25 years ago I wasn't even earing 6k.  17k was a decent wage back then.

25 years ago the average wage was just under £18K

[RichardT]

2 hours ago, Sjcm said:

well I'm definItely going to have a rest till after April😂 The trouble is its all about interpretation isn't it or more accurately yours vs HMRC.  the example on the HMRC site is a good example.

 

Sally clears out her attic and decides to sell her unwanted items online. This is a one-off activity for Sally, and the items sold are for less or the same as the original purchase price.

 

well if its not one-off because you building a new lay-out and you're flogging the old lay-out items and loco's as you go? And technically there's a good chance you could get more for a loco on ebay than you paid 10-20-30 years ago. Taking it to its ridiculous extreme, if you had a load of mid-70's loco's you're guaranteed to get more than the original purchase price.

I can’t help feeling that you’re over-thinking this a bit!

 

Richard