HMRC tax on £1000 sales

[Anonymous]

Does the £1000 p.a. sales figure include postage? I sell low value items & the postage is usually higher than the value of the item.  On £1000 sales i'd be lucky to make £200 profit.  Seems the end of Ebay for sellers like me.

[ett1954]

@1984jo   "they do have to prove Ur guilt because the law is very straightforward, the person accused someone off something is the one who got to prove it, not the other way around."

I am afraid it is not; have you ever had a speeding ticket or a parking ticket?  HMRC before notifying anyone will have already done their homework and will have information to justify carrying out their investigation. 

HMRC work on set criteria to follow up on after they have done their analytical work.  The major considerations are:

buying goods to then sell online.

make items themselves to sell for a profit.

sell goods for others, on commission.

sell a service and get paid for it.

They will have your sales, and purchasing information, from the digital selling platforms you are active on, they have details of your income from your employer, your pensions (state and private), benefits and of course your bank accounts and other life-style information (if they have felt the need to request that).  It will be up to you to convince them otherwise if they suggest you are running a business and owe tax.

[ukhaberdashery]

I don't know who told me the story that you have to prove your innocent and it could have been a tv documentary years ago. I think it was a shop where cash changed hand frequently (credit cards were not used much) so money could be syphoned of into the owners pockets without any receipt and free of tax.  So then you have a shop with a lot of turnover but very little profit. Since the taxman could not prove it had been taken they looked a the same businesses elsewhere and said for every £1000 they showed a 10% profit but other similar shops had a profit of 80% so something weird was going on. The shop owner than had to prove what was wrong. (looking back it could have been channels 4 docu series "meet the taxman"

But at the end of the day you can be fined 100% on top (of what they do know) if there was fraud.

They basically have the powers of the police, can arrest you etc.

[*vyolla*]

The best recent case was the one of the security guard who was selling on eBay as a sideline, scroll down to 

"HMRC detective work means tax bill for eBay trader":

https://www.wilkestranter.co.uk/news/newsletters/2023/issue-4

[myriad*seller]

eBay get MORE fees from business sellers

eBay have already started making people who go over the limit change their accounts to business accounts

Anyone who goes over the limit may be asked to alter their account to business (or the account and all funds from sales will be frozen)

So yes, eBay ARE already making people change to business accounts as they get more fees when people register as a business and it means they are in line with consumer law!

See this thread for proof https://community.ebay.co.uk/t5/Business-Seller-Board/Ebay-forces-upgrade-to-Business-due-to-new-HMR...

[*vyolla*]

And the best recent case that shows that HMRC will consider you guilty until proven innocent (if you can afford it) is this current one:

https://lexlaw.co.uk/solicitors-london/british-post-office-horizon-it-scandal-hmrcs-ancillary-attack...

[myriad*seller]

The tax man will stake out shops and see how many customers go in over a week

Then they will have proof that sales were not declared

They don't just guess, the tax man has many ways to find out who is evading tax (unless the evader is a politician, obviously) 

[ukhaberdashery]

Yep they could also go into shop and make a purchases in the shop only for at the end of the week go in and ask for your daily till recepits and see if thier purchases had been put down.

[myriad*seller]

This is exactly what they do!

I know of one who staked out a kebab shop for a week, as the shop apparently sold virtually nothing all week

HMRC were completely surprised by the vast trade in hot food they observed - so they went into the books in GREAT details

They even investigated the exact number of toilet rolls apparently used by the business, as it seemed to exceed normal usage by X employees, and found the owner was supplying his own family with toilet paper for the business. So their tax liability just kept going up and up at that point. Once they smell one little fraud, they do digging, very deeply! 

Don't mess with HMRC as they WILL investigate EVERYTHING 

[vinylscot]

@myriad*seller Your post at message no 64 was very pro eBay, as opposed to being "real world".

There's nothing wrong with being pro-eBay; overall, I'm pretty happy with the company.

However, eBay is not, as a policy, encouraging "dodgy-looking" private sellers to change over to a business accounts. There will always be sacrificial lambs, and it does happen from time to time, but, in general, it just doesn't happen.

The "limit" you refer to has no bearing on the business/private debate. A seller could sell £100,000 of items in a year, and still be a genuine private seller. As long as they were declaring that additional income in their tax return, everyone would be happy.

And finally; the reason that eBay don't enforce the change to business accounts is that they would see their income drop dramatically. A huge number of such sellers would simply stop selling on eBay. So, yes, eBay might make slightly more per £1000 sales from business accounts in commission, fees etc, than they would from £1000 of sales fom private accounts.

However, their total sales would drop enormously, as so many sellers would just leave, so eBay's total income would drop accordingly. It's not rocket science. eBay know this. They could root out tens of thousands of bogus private sellers with little more than a press of a button, using indicators such as volume of sales, feedback numbers, nature of "stock", etc. They have always been able to do so, but have always chosen not to.

[myriad*seller]

Did you read the thread I linked to? 

eBay have started forcing sellers to move to business accounts

eBay get MORE fees when sellers are correctly registered so it IS in their interest to force the change

Now the system flags sellers once they reach £1700 in sales (or 30 sales) it is becoming automated

[papso22]

A genuine private seller selling £100,000 of goods does not have to declare them on a tax return because it is not taxable income.

[myriad*seller]

From the OP from the thread I linked to 

I've received an email from ebay forcing me to switch to business account due to the volume of my recent sales. Customer service explained that I exceeded £1800 in one month, so they act in line with new HMRC regulations

As I said, the registration trigger is now automated by eBay, as soon as sales exceed £1700 or 30 items, eBay are requiring sellers to change to business 

https://community.ebay.co.uk/t5/Business-Seller-Board/Ebay-forces-upgrade-to-Business-due-to-new-HMR...

[ukhaberdashery]

Just like they make money from fraudulent listings for motorhomes which leaves the buyer out of thousands.

As long as they get thet listing fee they are happy for it to continue.

[vinylscot]

@myriad*seller   That thread, with around 90 responses, contained ONE seller who had asked to change to a business account. One other poster reported something similar happend to them in the past. If eBay was genuinely running a campaign to force sellers to change, 1) there would have been dozens, if not hundreds, of posts on the board about it, and 2) they probably wouldn't have chosen this guy as an early target - he's just a sacrificial lamb who has come to eBay's attention, and serves as an example. 

You're also clearly wrong about eBay receiving more, if people convert to business account. So many will just leave eBay, rather than convert, that eBay's income would drop dramatically. Just think about it.

[ukhaberdashery]

Maybe ebay are worried that when HMRC sees all the dodgy private sellers they are going to investigate ebay more. I think it is time that even ebay has had to look at how they are running the business and are therfore trying to reduce the blow. Ie 30 people are on the news for being private sellers and have now been fined £300,000. Private sellers we be falling over each others to get off the platform once they hear that news.

[vinylscot]

@papso22   Correct, I worded that part of my response badly, but eBay would report the level of their activity to HMRC, who would satisfy themselves that there was no action required.

The previous poster had quite wrongly stated that "eBay have already started making people who go over the limit change their accounts to business accounts Anyone who goes over the limit may be asked to alter their account to business (or the account and all funds from sales will be frozen)" Just silly scare-mongering from someone with a limited grasp on the situation, based on ONE example.

[ukhaberdashery]

I understand if he is selling beloved 20 year old Lotus esprit, but if buying to sell they would on any item.

[sagr2519]

All good if only people buying to sell get caught out by this. Considering that the Horizon computer system of Post Office scandal was originally designed to be used for detecting benefit fraud...

[1984jo]

No but I am a criminology student and we have to no the law, and the law said that people who are accusing u, have to have proof that u are doing something wrong, that is why when someone is doing something like benefits fraud it takes months of investigation work to complete because u can not just say someone is doing something wrong without proof and investigation. The burden of proof is on the person or people who are doing the accusing not on the person who is been accused. This is our the law in England and Wales works. So they would have to have proof that you are not selling Ur own stuff and it would also have to be off benefit to the tax payers for them to look at someone, so basically if someone is just making a couple hundred a month that means they are going to pay a little or nothing in tax so no benefit but if someone is making thousands a month than that would be of benefit and than they would start a massive investigation that could take months to prove, the accused than can put their argument forward that they are selling there own personal property but by this time (Let say) HMRC could have the information that they stuff u are selling is not your own personal items. U can not just tell someone they do something without proof, they have to investigate and that is on HMRC to prove there case not u. 

But I can think what ever u like. 

[turtley_worth_it]

Apologies but that is not how the tax law works in the UK. You're statement is worrying at best, and factually incorrect throughout at worst. That said it is framed from a criminal angle so that can be understood.

Having worked in the industry for some time I can share my experience of my interactions with the revenue.

HMRC work on civil law basis primarily, retaining criminal prosecution for the most serious of offences: evasion, fraud, etc. It is therefore not a matter of burden of proof, simply balance of probabilities. As such there is no need to 'prove' anything. A tax enquiry once opened can be closed, with or without amendments to a taxpayer's return, based on the opinion of the officer of the revenue. It's their opinion that matters. Their opinion is of course backed by evidence, strong or weak, depending on your cooperation, the information they have or have not gathered from you and others, and analysis of what they believe the correct assessment of tax is. They don't just pluck figures out of the air.

You are correct it could take months, even years. Equally, if it's so blatantly obvious someone is trading (for example because they are indeed making thousands a month and have a variety of items for sale, or one) and that someone fails to cooperate or submit a return, the officer has the power to simply determine the tax and it is up to the taxpayer to displace it. They may displace it if they aren't trading but that requires them to show it.

Their is of course appeal rights but depending on the case it is for the taxpayer to displace the revenues assessment. In these types of cases, where the revenue believe trading is occurring and it has not been declared, expect the taxpayer to have to demonstrate, on a balance of probabilities, the revenue are wrong.

You are likely right about the numbers involved too. The revenue may focus on the highest evaders. Then again, they might not.

Best advice for anyone is declare your figures correctly, and if in doubt, seek professional advice.

Do not listen to randoms on the internet, including me!