HMRC concerns, private seller but moderate turnover over two decades.

[bailey2agd]

I joined eBay in 2002 finding a collectors world I could only previously dream of and quickly run up credit cards to tens of thousands buying diecast cars from my childhood in the 60’s.

Of course I had to sell them again a couple of years later. I found that selling on ebay is harder than buying, the price is almost always less than you paid.  (I’m still paying off those card debts).  Over the last 15 years I rebuilt my collection taking care to pay only cash and I have close to a thousand mint, boxed toys and still adding occasionally . I also have a huge, high value stamp collection, a life long passion.  I sell off stuff i no longer want or perhaps if i find a better example to replace one i have.  As i come up to retirement and having a reality check with my partners health I’ve decided to liquidate all these superfluous belongings. This could be a six figure sum. These are my own personal possessions, I haven’t got receipts, surely i’m entitled to sell them without tax? I’m worried i’m going to get in trouble or just have to keep them when i’d rather use the money to enjoy our retirement. 

[sml192]

Sorry, but you are wrong. 

The 'Annual exempt amount' and the 'Chattel exemption' amount are definitely 2 different things as defined in the 'Taxation of Chargeable Gains Act 1992' (sections 1K and 262 respectively).

The 'Annual exempt amount' (currently £3,000) is the total overall gain (profit) that can be made in the year before becoming liable for tax.  

The 'Chattel exemption' is the amount that can be made (proceeds not profit) from the sale of an individual item or set before it is considered a chargeable asset.  It has been £6,000 ever since the 'Taxation of Chargeable Gains Act 1992' was enacted.

An item sold for £4,500 would, therefore, be exempt regardless of the profit made.

I do agree that the guidance provided by HMRC on the gov.uk site could probably be clearer and that it would be well worth anyone intending to make a large sale seeking clarification in writing from them first. 

[dch2112011]

HMRC deciding whether a person is trading or liable for tax - income or capital gains is an extremely complex matter and open to interpretation by HMRC - they are really the only ones who will decide - if you disagree the onus is on you to prove them wrong that much I am certain about.

Whether a collector is liable for tax is a grey area when it comes to capital gains but more worrying for collectors is HMRC's definition of trading regardless of whether the items are personal or not and one part of  the benchmark to class someone as trading is whether they are occassional sellers or not.

The interpretation of occassional sellers is ambiguous but someone selling a collection constantly over a long period of time may be assessed as trading and be automatically calculated for income tax on the gross sales total if they have not declared their turnover to HMRC as personal on a tax return.

It seems that HMRC are becoming more active in pursuing small businesses and individuals to recoup unpaid tax.

Banks are reporting your finances to HMRC already - interest on savings, dividend payments, rental income, pensions, payments into your accounts.

Last week my brother had a tax 'bill' for £1700 for year 23 /24 - no notice, no letter, no request for a return just a tax bill to be paid by 31st January.  He has had to pay this before he can appeal the bill- this information came from information supplied by the banks and financial organisations on his saving interest, dividends and two pensions which came into affect in 2023 - 10 different accounts all reporting- some not even banks.

I am guessing that turnover from internet transactions are simply going to go into the pot and those that exceed the thresholds and have not filed a return to explain the income  will be assesed as a private seller trading and have the gross turnover treated as profit because a private seller cannot claim business expenses such as post, purchase price etc.

It will then be up to the individual to appeal the decision with HMRC, those that cross the threshold and submit a return declaring with explanation that their sales are personal have the luxury of HMRC agreeing with them or not before being taxed.

Another snippet is the personal allowance if you are working under PAYE and selling  online you will probably find the personal allowance is only applied to you paid income and the side hustle will be taxed without the personal allowance.

But as previous posters have stated if you are at all uncertain or worried talk to a tax advisor or HMRC !

[the_book_seekers]

I was late doing my self assessment this year. I usually try to have it in by the start of January.  This year it went a little closer to the wire than I would've liked, but the emails and text reminders from HMRC became daily.

[dch2112011]

Yes they have been particularly active with reminders this year for those registered for self assesment - those who ignore are going to be financially penalised.

The snippets of information in my previous post is aimed at those who have not registered for self assesment yet exceed the thresholds - the information HMRC  mine from all sources currently establish the tax basis and although I assumed that it would be an enquiry letter or request for a return it seems based on my brother's experiance that HMRC are not being so lenient - a bill currentlly is  raised based on the information harvested without prior information from the tax payer to the contrary via a tax return. (HMRC might change their approach in the future  but they seem to currently have taken the easiest approach for the anticipated volume of potential tax payers )

HMRC have a record of an individuals income stream  which is submitted to them annually - any annual notifications seemingly are being taxed in the tax year of receipt -  so previous years tax may not show as due until the following tax year for those who have not submitted  returns  which could result in a larger tax bill until it levels out 

It is highly complicated as always, there are going to be a lot of people who will convince themselves that HMRC does not apply to their activities who really need to seek reassurance from a tax professional.

[johnwash1]

I'm not going to join in on amateur tax advice evening.  Instead I'm focussing on something else in the original post, something I'm surprised nobody has yet commented on:

"(I’m still paying off those card debts). Over the last 15 years I rebuilt my collection taking care to pay only cash ..."

What?  Still in credit card debt, yet using available cash to buy non-essentials?

I'm not gong to criticise the OP for this, I blame the lack of finance teaching in this country.  It's horrific.  Martin Lewis can't put his feet up any time soon.

Am I out on a limb here?

[bailey2agd]

This is because I entered a debt management process in 2009 which is essentially interest free and will end this year. There was no sense in paying off the debt once it fell under this arrangement. I was originally advised to go bankrupt but I wanted to do the right thing as far as possible and pay back the six figure sum. I have no other debt, no credit cards and don’t ever wish to. It’s a hard lesson but worthwhile to be honest.
I have used any spare money or returns on my ebay sales to expand my collections where possible in the intervening years.


Sent from my iPad

[johnwash1]

@bailey2agd 

Forgive me please, I made the same mistake I often criticise others for on these boards, jumping to conclusions.  Clearly you didn't just blindly go into this situation unlike some I'm thinking of (e.g. I have a friend with serious shopping addiction problems and he was at one point many 10s of thousands in debt, much like gamblers do).  I wish you well with your efforts.

[dch2112011]

Always has been and always will be an easy option to spend 'unreal' money with any cashless system. it only becomes real when either it comes to repaying the debt or these days realise that the rent isn't going out because you have tapped a few too many times !

And oh boy hasn't online shopping aggravated the situation - online gambling, online purchases, even charities are getting in on the act.

Mobile phones are now classed as essential items, everything financial is app based. 

The biggest growth industry over recent years is debt management ! 

Debt is now acceptable and barely punishable - all that happens is the bad debt is charged to the paying customers  -

The OP is definately unusual in that they are servicing their debt -  most don't and with IVA's etc debt can be written off over a few years with hardly a repayment ! (little wonder dishonesty is so rife on ebay - people believe it is normal and acceptable to try and make money for nothing ! )

[johnwash1]

@dch2112011 

"Always has been and always will be an easy option to spend 'unreal' money with any cashless system."

Yes, I pay for as much as possible with cash.  The act of having to start another £20 note is a useful wake-up.  Our local chippy is cash only, I'm pleased to see.  And I believe some countries haven't gone overboard to cashless, the way the UK has.  Spain, for example.

"Mobile phones are now classed as essential items, everything financial is app based. "

The only finance related app on my mobile is the ebay app (which is pretty useless to me except for adding photos to listings, for which it's brilliant).  But no other finance is going near my phone.  And I'm regularly gobsmacked to learn what people pay for their phones.  Bought mine for £100 3 years ago from John Lewis.  Lebara SIM, less than a fiver a month.  All works brilliantly.

"little wonder dishonesty is so rife on ebay"

I have to say that's not been my experience.  Very occasional.  More trouble with people who don't read titles and descriptions than with cheaters.

[bailey2agd]

You are right, and it’s astonished me how many people I know, will admit to having had similar situations. These are responsible adults with good careers and families but credit spending and peer pressure has usually played a role. I certainly became addicted to ebay in the early years and I didn’t see it as debt as long as I could afford the monthly card payments.  How wrong was I?

But i’ve been equally astonished at people’s reactions when i tell my story, no-one can believe that I chose to go this route. (it wasn’t all magnanimous, it did allow me to retain my house and other assets to be fair). But without exception everyone said i was stupid and i should have just got it written off.   The banks are also partly to blame, their lending was irresponsible, upping card limits when already maxed out and only minimum payments being made, I’d actually say they were immoral.

[dch2112011]

True words indeed -  some banks and more so these days financial unregulated lenders have no morals where lending is concerned - and people are great at jumping on the moral high ground conveniently suffering from selective memory when it suits !

The on demand society we live in - buy now pay later  has for many become the norm - that's why 2008 was so devastating - people running up debts to their max then remortgaging to pay it off time after time then the crash and self assesment mortgages were withdrawn, remortgaging was suspended as prices fell and people were left with debt mountains unable to be serviced.

But the lifeline came in the form of government sponsored debt management -   Ah no need to repay the debt  make nominal payments and write it off - little wonder people have no respect for money and feel it is ok to try and get something for nothing - after all they have been educated to do so for many years.

[goodibags]

Thank you for posting the badges of trade link.

I'm wondering about a possible situation arising from the sale of postage stamps. I've bought lots over the years (as an investment, to use for posting items I've sold). But now they're being phased out, both by Royal Mail in moving to tracked postage bought online, and by Ebay in the eventual move to Simple Delivery (postage paid by buyers). So I've ended up with a small pile of stamps I'm unlikely to use.

Obviously, there was also a cost incurred in originally buying the stamps. Whereas Ebay reporting seems to list gross 'income' (it doesn't even bother deducting the postage cost to send an item when that has been separately itemised) I appreciate it can't possibly take into an item's original acquisition cost. 

I guess it's one of those things that will need explaining if and when the enforced sales push my totals up above the reporting threshold?

[vintique*violet]

Yes they are classed as " assets"... CGT could be applied if an item ( asset) is sold above £6000, or as part of a collection to the same buyer. Have a read on the Gov site under CGT... also as these are your personal items you have enjoyed for years they should not be subjected to income tax, bearing in mind you have a tax free allowance of £12570 per annum anyhow.  

[jere-nott]

I'm very interested in you stamp collection