When do I have to declare for tax?

[lucie3460]

I've recently been gifted a load of items to sell..

I'm donating 10% of each sale to a charity..

However, these items have been selling unexpectedly well and in a few weeks I've made a profit of just under £500. 

I'm a bit worried that soon I'll have to declare for tax but I don't know how much I need to have 'earned' before this happens. 

Can someone please tell me how much this is and I'm assuming it includes the postage? 

Also, does the 'total earnings' stated on my Selling page include the postage?? 

Many thanks in advance 😊

[four_mid_able]

"I've made a profit of just under £500"

Private sellers don't make "profit".

https://www.ebay.co.uk/help/policies/selling-policies/business-seller-policy?id=4710

[dch2112011]

UK personal allowance is £12570 total  - so with paid earnings, pension, income from savings interest etc  plus the few sales on ebay - you do not have to worry until you reach the threshold -  for the purposes of income tax the total amount of the declaration for your ebay sales  is your net income ie  less costs, fees, packaging postage etc

However if selling for profit online you need to register for self assesment once your gross for profit sales exceed £1000  - you then declare your sales for profit in the tax form - costs etc will also be declared  and are deductable - this does not mean you will pay tax because the personal allowance of £12570 has to be exceeded before you are tax liable.

So in answer to your question register for self assesment once your online sales reach £1000  

You should register by the 5 October after the end of the tax year you started earning self employed income.

The deadline for filing a paper return is the next 31 October or 31 January if you’re doing it online.

[dch2112011]

I believe HMRC may deem you as trading if you sell gifted items or even personal items repeatedly - this is the interpretation HMRC put on it - ebay may see it differently in terms of the type of account you hold, they have different criteria and interpretations to HMRC 

If you have no receipts for costs as they were gifted you may be better off claiming the £1000 allowance offered by HMRC  when filling in the tax return

[4_bathrooms]

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@lucie3460 wrote:

I've recently been gifted a load of items to sell..

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Can you elaborate as to how these items were gifted to you?

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@lucie3460 wrote:

However, these items have been selling unexpectedly well and in a few weeks I've made a profit of just under £500. 

I'm a bit worried that soon I'll have to declare for tax but I don't know how much I need to have 'earned' before this happens. 

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If you are trading you need to register for self assessment when your turnover (not profit) exceeds £1,000 in a year. Also note that at that point you will also require an eBay business account to keep your trading activity legal. You can create a new business account if you want to retain your private account for personal buying and selling (something I'd strongly recommend).

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Can someone please tell me how much this is and I'm assuming it includes the postage? 

Also, does the 'total earnings' stated on my Selling page include the postage?? 

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If you are trading your turnover is everything you charge to the buyer including postage. The postage you purchase, eBay's fees, and the cost of anything you purchase for the business are expenses. If you're not already doing so donating through Gift Aid means the charity receives an extra 25% and you can claim a relief. For donations made via eBay you need to login to PayPal Gift Aid to make your declaration. You don't need to be a business to claim Gift Aid; you just need to have paid enough in income tax (including from PAYE employment) or capital gains tax in the same tax year.

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[magpiecorner1]

If gifted they are personal possessions - chattels.  Not bought for resale, so not being traded merely sold, no reason to register for self assessment.   Money is not profit, simply cash raised from the sales.  Not earnings so nothing to do with personal allowances.  Liable for Capital Gains Tax if an individual items (or pair or set in some cases) with some exceptions, sells for over £3000 after selling costs. £6000 if owned if jointly owned by you and another.  No limit on how many of your personal possessions you can sell, only concern is individual values as stated.  Perfectly feasible to have a whole house contents or a massive collection, or a very valuable classic car to sell (the car is except from CGT).

Donating to charity - you might be able to claim tax relief against your other tax liabilities.  Speak to the charity about this.

Worth getting something in writing from the person making the gifts, any paperwork would be wonderful but not mandatory - if gifted in a will the items may have been subjected to inheritance tax, but not your burden. 

Read the HMRC website, which explains all this.

[dch2112011]

In order to pay tax on the goods or services you sell online, you either have to be trading or making a capital gain.

HMRC assess this not only in terms of selling gifted or your own possessions but use the benchmark of regularity of selling as a prime consideration as to whether they class the activity as trading or not

The rule of thumb is that selling online is still classed as trading when done on a regular basis.  This means that It would be anything that is not a one off situation which this may be.

This overrides the seller on ebay who continuosly sells old clothes for example regularly over a period of time  simply stating  they are clothes I bought and grew out of or new 'other' items that i never wore  from the back of the wardrobe.

HMRC have all the angles covered - however each case is assessed individually and will depend on their benchmarks and enquiries with each individual 

You may find it interesting to read through HMRC'S  SELLING ONLINE COMMUNITY FORUM where HMRC answer openly questions raised by individuals HMRC COMMUNITY FORUM ONLINE SALES 

[papso22]

That's a very interesting forum.  It's full of 'might' and 'maybes' unless the situation is extremely clear cut and the answer is glaringly obvious.  This fits with HMRC's understandable reluctance to give tax advice based on a question with no evidence which could then be used to claim 'legitimate expectation'.   

In addition, the 'advice' seems to lean towards trading and declaring, which I think is the wrong answer  for many of the posts.  I wonder what grade of HMRC officer provides the answers on that forum?

[*vyolla*]

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@lucie3460 wrote:

I've recently been gifted a load of items to sell..

😊

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Honestly, looking at the items you've sold and are selling (new skincare products with multiple quantities available) I believe that HMRC will view you as trading unless you've some proof that these items were gifted to you, else every private seller trading as a business could turn round and say that their items were gifted. Pretty sure that HMRC have got that covered.

I'd make sure that you keep accounts.

[dch2112011]

The only comment on the standard of HMRC employees answering the forum's questions is that whatever grade they are, they will be briefed by HMRC and will have access to HMRC resources.

The interesting point is the growing momentum and unity in quoting that HMRC could construe trading based on the amount of time and regularity that an individual sells 'unwanted items' 

It is all guesswork trying to piece the puzzle together but with the reporting value and order numerics being placed on online platforms to provide seller information to HMRC it has some credance.

My guess is that with the rapid expansion of the HMRC online compliance teams that they are gearing up to investigate more traders or potential traders. 

I also guess that computer algorithms will play a huge part in analysing the information from the platforms to initiate any investigation which may start with a simple request to fill in a tax return to those who have reached the tax threshhold with the determined number of sales over a determined period of time.

It is only then that determinations will be made as to whether a seller is genuinely disposing of unwanted possesions or that they will be determined to be trading.

In the instance where a business has failed and goods are gifted for resale as seems to be the case in this post by the nature of the goods being sold, it could be easily possible that HMRC will not view this as selling  one off unwanted posessions at or below there purchase price .

They could easily be construed as obtained for sale for profit and the poster become classed as a trader.

Obviously the poster has to make their own mind up but if they submit a return with full explanation they are unlikely to be caught out or of course they could simply wait and see if HMRC pick them out for further scrutiny when the information is submitted from the platform.

HMRC will not investigate everybody that is for sure but how they use information to select sellers for scrutiny in any form will become more apparent over the coming years.

I just feel it is wrong to categorically state that sellers will definately not have to submit tax returns or that they will definately have to submit tax returns on an ebay forum.

[thesmi42]

"selling skincare products"

Would it not also be advisable for any seller to be prepared for legal action in the event that the buyers' health is damaged as the consequence of using such products?

[myriad*seller]

Its £1000 TURNOVER, not profit 

[dch2112011]

That is correct £1000 gross turnover is the notifiable figure however income tax is payable on the net profit  which can be determined in the usual way with receipts or a trader can take advantage of the £1000 tax trading allowance  if no receipts are available.  If used this may affect other allowances.

But thanks for randomly pointing the notifiable amount out 

[*vyolla*]

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@thesmi42 wrote:

"selling skincare products"

Would it not also be advisable for any seller to be prepared for legal action in the event that the buyers' health is damaged as the consequence of using such products?

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Personally, I wouldn't be listing a load of 'gifted' skincare products, some of which it seems are no longer manufactured, which implies that the manufacturing date needs checking. 

I also have no idea why anyone in their right mind would buy skincare products from any private online seller.  Anyone can undo a lid and then do it up again, thus contaminating the product. Bonkers.

[geosacha007]

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@dch2112011 wrote:

In order to pay tax on the goods or services you sell online, you either have to be trading or making a capital gain.

HMRC assess this not only in terms of selling gifted or your own possessions but use the benchmark of regularity of selling as a prime consideration as to whether they class the activity as trading or not

The rule of thumb is that selling online is still classed as trading when done on a regular basis.  This means that It would be anything that is not a one off situation which this may be.

This overrides the seller on ebay who continuosly sells old clothes for example regularly over a period of time  simply stating  they are clothes I bought and grew out of or new 'other' items that i never wore  from the back of the wardrobe.

HMRC have all the angles covered - however each case is assessed individually and will depend on their benchmarks and enquiries with each individual 

You may find it interesting to read through HMRC'S  SELLING ONLINE COMMUNITY FORUM where HMRC answer openly questions raised by individuals HMRC COMMUNITY FORUM ONLINE SALES 

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This is just not true and in the link you posted the tax adviser eventually acknowledges that when the woman asking the question corrected him.

You can sell as many personal possessions as often as you want and it doesn't make you a trader.

[*vyolla*]

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@dch2112011 wrote:

You may find it interesting to read through HMRC'S  SELLING ONLINE COMMUNITY FORUM where HMRC answer openly questions raised by individuals HMRC COMMUNITY FORUM ONLINE SALES 

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Amazing.

I thought that was a spoof site give that the answers provided by the HMRC reps were incorrect most of the time there. 

[dch2112011]

No one disputes that you can sell your own posessions -  this was not the gist of  the post - it is how HMRC determine whether you are trading or merely selling your own bits and pieces.

HMRC will have their own criteria in which to determine whether an online seller is trading or not - it will as always be down to the individual to provide explanation and evidence to the contrary if they disagree.

I would revisit the thread on the HMRC website and read it again, there are more than one contributor on both sides.

HMRC clearly and repeatedly state and reinforce that one of the prime considerations to determine whether a seller's activity online is trading or not will be whether it is a one off activity or whether it is done on a regular basis.

If you disagree with HMRC I suggest you take it up directly with them, I can only make you aware of what is publicly being stated by HMRC.

I wonder why HMRC criteria for ebay reporting includes not only the tax threshold but also a sales quantity threshold if the number of items you sell can be infinite as you suggest - Could it be the catalyst to spark further investigation by HMRC  ?

HMRC  put the onus on the individual to prove their income -  so could it be that if you sell 30 items and reach £1000 turnover that you will be asked to file a tax return  declaring your income and that you will need to prove that you are selling personal posessions not for profit ? 

[dch2112011]

I am not sure the answers are necessarilly incorrect, they seem to be referring to the internal criteria that HMRC have for determining online trading.

A bit like ebay - they publish rules and policies for public viewing but have internal criteria which is hidden for determining the rules and policies

[papso22]

For some years now 95% of HMRC's guidance has been publically available.  The 'hidden' bits relate to fraud and evasion.

The HMRC responders will presumably have access to that publically available information.

When taxes are self assessed it's reasonable to provide the public with all the rules.