Income Tax Trap for online Traders

Finally HMRC has come to grips with those who sell certain products or used items on websites such as Gumtree and eBay. So who should be worried about these latest attempts of HMRC to earn some more money?

Targeting online traders for tax

Over the last few months HMRC has been busy trying to identify those who use Internet to advertise and sell goods or services. HMRC is suspecting that some of these traders may have not declared all of their income from the sales that they generate from these internet sites. Those who haven’t declared these must contact HMRC by 14 June or face the reality of harsh punishments.

Trading status

HMRC provides some brief and sometimes misleading guidance on his definition of taxable trading income. But it is easier said than done because it is very difficult to define what trading income really means. Therefore, if you’re in doubt you should find your local accountant or a tax advisor.

Personal items

If you bought something for personal use and later decide to sell it, this doesn’t count as trading. Usually you’ll sell the items for less than you paid for them so there’s no profit to tax anyway. Where you receive more from selling a personal item than it cost you, perhaps because it was a gift, this isn’t trade income.

Intention to make a profit

The HMRC suggests that if you make things and sell them you will fall under the category of trading. This description could apply to someone who lets say engaged in  making greetings cards, but who occasionally sells a few to recover some costs. HMRC has the possibility of treating this as a trade. If that is the case they must also take into account the expenditure incurred for materials used on cards and overheads.

If you are in doubt as to what category that you fall to it is always better to contact your local accountant. KVS accountants have the experience and knowledge in looking into these kinds of sensitive matters as we have helped few clients in similar cases. KVS Accountants serve small businesses in Roehampton, Putney Heath, Barnes, Barnes Common, Earlsfields and Battersea.

 

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