If I sell collectibles from my collection and buy more with the money am I still liable for tax?

[mickyblu007]

Hi eBay community peeps. 

My collection is constantly evolving. I buy something, then I see something else I love and buy that but I have to sell other things to make space. Some things I do buy when I see them cheap for my collection so when I sell i probably do make a bit of a profit and this goes back into my collecting nightmare habit, rather than dipping into my wages.

My question is if I am reinvesting my money in the purchase of more collectibles am I still liable for tax? As it's a bit of a compulsion and I probably sell quite a bit it probably looks like I'm making 1000 profit but then again some items I probably sell at a loss because I just need the space. How do I offset it all especially if some things I paid cash off Facebook 10 years ago or some things I bought on eBay that I no longer have the original listing for that tells me what I paid. Some items I buy damaged and repair so have bought all the stuff to repair it. My bank account is a nightmare of funds in and out how would HMRC work it all out as all they will see is my sales info from eBay. 

cheers

[robbtyke132010]

You will not be alone with this & probably the worst logistical nightmare for both you & HMRC. My collection goes back 40 years - who keeps receipts before eBay was even born? And a lot of purchases have been at Car Boot sales & Doctor Who Conventions where the only paperwork that exchanges hands is of the cash kind. It is impossible to tell with this buying & selling scenario whether any profit is made at all. The DVD/CD business I run is declining rapidly & prices are dropping steadily - I am trying to offload as much as possible before they reach car-crash levels & selling now well below cost but my income looks juicy for HMRC plucking. I will have difficulty explaining this to a hard-nosed tax inspector. Many other people must also be in the same boat tirelessly throwing water over the side with a leaky bucket to stop from drowning. (I do love a metaphor!)

[mickyblu007]

Exactly. If someone's in need of releasing some cash because they are in financial trouble and you sell off your old collection how can you prove to HMRC how much profit you made if it's a child hood purchase or like you said you've had it for 40 years and the majority are cash sales do you pay tax on the full value of the sale because you cannot disclose the original purchase price? Are they going to take the original price of £1.49 in 1982 as the price 😆 and anything beyond that is profit? I would call HMRC and wait 3 hours on the phone to speak to someone but they are likely to be as clueless as us all on how this would work. 

[cobwebcottage]

'My question is if I am reinvesting my money in the purchase of more collectibles am I still liable for tax?'

This is trading as you are buying to sell so yes, you should declare these purchases and sales. The best way to do it is to keep both sides separate by having two accounts ( one should be registered as a business account as you are trading). At the very least, you should keep records of your sales and purchases.

[mickyblu007]

Ow the joys 😫 thanks for ruining my day ha ha.  Looks like I'll have to make a spreadsheet and put down all my purchase prices and all the money I've spent repairing them. Most of the stuff I sell I've had 10-15 years so that's going to be fun to work out. What about if I've bought glass cabinets to store them or  tools to clean them and the bits to repair. Do I factor all that in as a business expense? I've got zero knowledge on personal taxes and have never done a tax return it's all done PAYE.  If a business would I be able to take a wage ? Business mileage to go to car boot sales or buy things? Heating and electric to keep them from going mouldy? I have a yellow storage too for all the boxes do I include this ? 

[*vyolla*]

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@mickyblu007 wrote:

Ow the joys 😫 thanks for ruining my day ha ha.  Looks like I'll have to make a spreadsheet and put down all my purchase prices and all the money I've spent repairing them. Most of the stuff I sell I've had 10-15 years so that's going to be fun to work out. What about if I've bought glass cabinets to store them or  tools to clean them and the bits to repair. Do I factor all that in as a business expense? I've got zero knowledge on personal taxes and have never done a tax return it's all done PAYE.  If a business would I be able to take a wage ? Business mileage to go to car boot sales or buy things? Heating and electric to keep them from going mouldy? I have a yellow storage too for all the boxes do I include this ? 

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HMRC's page below explains what you can and can't claim for:

https://www.gov.uk/expenses-if-youre-self-employed

[cobwebcottage]

If you decide to continue to trade (legally), you will need to keep all of your expenses to offset against income generated so storage costs, mileage, cost of goods, supplies etc, etc will all need to be recorded. keep all your receipts. The best way to go about this is to appoint an accountant and you can off set the costs of this too. It really is good fun, even if you do it as a second job or just to top up your income. It is hard work though as you need to keep on top of it daily. Listing, buying, selling, keeping records, cleaning, repairing. The list goes on but I would recommend it to anyone who has a good knowledge of what they are selling.

[cobwebcottage]

Forgot to say, yes you can take a wage if you are registered as self employed. You are your own boss!

[mickyblu007]

🤢🤢🤢 gives me massive anxiety thinking about it all, I already work several jobs and have little to no time or sleep so I might just give up and move to the moon. Either that or just work out when I reach the threshold and stop selling till the next year. Although your link does say I can offset stock as a business expense so buying more stuff is a business expense right? I just have to record all my sales and purchases and I'm in the clear. 

[robbtyke132010]

I think that the Moon is now owned by the Russians & you will have to pay non-domicile tax. Sorry.

[mickyblu007]

Soooooo I have to register as self employed !! If I just keep all the records to as show the money is just respemt on stock ? The thought of being self employed suggests soooooo much work and someone's said get an accountant that just seems like overkill for me selling my own collection because I have no space to buy more. This world is really messed up and getting more and more messed up by the year. It's really deeply depressing 

[cobwebcottage]

IF you are only selling your own personal items, you don't need to do any of this. But you were talking about buying items and making a profit when you sell them. This will be seen as trading. Seems you need to have a long think about what you want to do in the future. Collect, or buy to sell.

[*vyolla*]

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@mickyblu007 wrote:

Soooooo I have to register as self employed 

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I don't know how much you're making, but there's a £1000 Trading Allowance, and it's for small/hobby business sellers.

They can sell £1000 worth of goods (gross sales, not profit) in a tax year before having to declare this on a self assessment return.

[magpiecorner1]

Check out the business allowances on the HMRC website - interesting reading - and spend a wee bit of cash on an hour or two of an accountants time, and ask him his thoughts on the process, including the upsides and downsides of starting a small business- if he laughs you out of the door, ask him to put his reasons in writing and ask him to go over what your investment allowances are, and the basics of Capital Gains Tax!  That will be all you need to put your mind at rest, and all you need should you be worried that HMRC might come knocking!

[magpiecorner1]

HMRC would be interested, so worth keeping an eye on things.  I think Capital Gain Tax allowances, which when down recently from of £12k a year are now £6k, might be reduced again next year.

So find out what CGT is - HMRC are only interested where the net profit from sales - that is after the purchase price and the selling costs are subtracted, leave a net profit over £6000.  That is normally per item, but would also be for a pair of items or a set (think  two matching vases sold together or a chess set).   And you get an allowance of £6000 at the moment.  So, if you sold a diamond ring that you inherited and the value was shown as part of the estate and included when calculing death duties, that is the starting value.  Say £10,000.  If you then sold it at Sotherbys for £20000, with  Sotherby costs of £3500, then tax would be on £6,500.  Your allowance of £6000, if not already used up, would mean £500 would be taxed, at 10% if you area basic rate tax payer and at 20% if you are a high rate tax payer.  If the diamond ring example was a Rolex watch or a car - they would be completely exempt from CGT, and indeed any tax.  If you then sold a second ring for exactly the same net price in the same year the CGT would be on £6500.  If you sold another 6 rings in the same year for £5000 each, there would  be no tax to pay on these items.

CGT is a tax on assets that have increased in value - so yes, your £1.49 in 1982 is a starting price.  If you sell you £1.49 item for £10,000, heck, pay the tax, which would be some £400 or £800, and pat yourself on the back for you good luck and your investment acumen.  Though if it was £1.49 for a toy car, it could be tax free, on the basis that it is an mechnical item!

[mickyblu007]

I've started doing the maths. Since Jan 2023 I've purchased more than I sold so I'll get the receipts together and hopefully the fact my collection has grown and I've bought more stock than I've sold that should show im not actually making any money right !? They just want to tax me on my earnings beyond the collection. 

[magpiecorner1]

My issue would be that your don't have 'stock' - only businesses have stock and these are your personal possessions.  If you registered and started a small business or a limited company, and introduce these as stock into your business, you would value them at market value.  Not what you paid.   Even if you what you paid is a whole lot less. 

The value would show on your books as both stock and monies owed.   Assets and liabilities - assets is the items and liabilities is what your business owes you for to buy them into the business or company.

There would be a cost of selling them and a cost of running the business, and business allowances.  HMRC deems that one of the badges of trade is 'intent to make a profit'.  Unless you expect to proceed with the business by buying additional items, all at well below market price and selling them at market price, with a profit margin that covers the annual cost of sales and all other annual business expenses and allowances AND will also return a net profit, there would be no point because there would be no tax burden.   Though there might be avoidance of CGT.

[moldosgifts]

If you keep the ones you buy for several yeras no. As in don't intend selling them.

If you buy with the intention of selling them yes.

If you buy to sell they will be new a collection your selling of cannot be new.

[mickyblu007]

I'm trying to figure out how that works because I buy things and then sell older things I've got or the same item but that are not in the same conditon. If I buy stuff for my collection as a sole trader it's in my collection could that be classed as stock even if it's not sold for 10-20 years ? 

[robbtyke132010]

My advice to you Micky ( & I am going to get a lot of flak for this) is firstly register yourself as a business with eBay - this will cover a lot of bases.

Now the taxman is a very cunning beast but he has limited resources & manpower & he will have been overwhelmed in Jan/Feb with on-line traders, from the entire internet sales sites, frightened by an HMRC knock at the door & asking for self-assessment forms. This will probably be in the tens of thousands & once they start to filter in, they are caught like rats in a trap & he will be able to extort maximum monies with little effort. 

So ( & this will be controversial but your business is small & there are a number of personal factors that you have outlined) do NOT contact HMRC for a self-assessment form or ask for taxation advice from them - it will throw up a red flag & you will end up in the "pending" tray. Wait for them to come for you - and I think that you will be extremely unlucky if that happens. A tax accountant I knew said that they only have enough inspectors/staff to pursue 10% of small businesses.

If they are investigating, you will in the first instance receive a self-assessment form - they will not come a'knocking with a squad car full of Rozzers & an arrest warrant. Fill in the self-assessment truthfully & accurately but enclose a letter with the personal buying/selling routine outlined. 

As I said this is not the advice you can give everybody but there does seem to be some very heavy-handed opinions given by other sellers here which even frightened me.

Take deep breaths, be happy & try eating porridge ( it will prepare you for prison food - just jokin' !! )