Are you racking up a tax bill by selling online?
With the government cracking down on tax avoidance, issues around online selling are coming back into the media.
Many websites, such as Amazon, eBay and Gumtree, allow individuals like you and me to sell unwanted belongings. However, more people are starting to trade online and are not declaring their profits to HMRC.
In order to determine the tax implications, if any, of your online sales, it is necessary to establish whether HMRC would consider you to be trading. As a trader you may be liable to pay Income Tax (IT) and National Insurance Contributions (NIC) on profits earned, as well as Capital Gains Tax (CGT) on profits made on certain items. A non-trader will be not be liable for IT or NICs but may be liable to CGT. As a general rule, CGT is payable on the sales of chattels, which are moveable items (i.e. not land or buildings), with an expected life of more than 50 years, where proceeds exceed £6k.
A trader can be defined as an individual or business that buys and sells goods with the aim of profit-making. HMRC’s guide to online trading adds that selling home-made goods, or taking commission for buying or selling items on behalf of another person, can also constitute a form of trading. If you meet any of these criteria you will need to notify HMRC and declare your income by filing a tax return.
Especially with the government implementing more and more anti-avoidance legislation, it is important that you declare your income if necessary and avoid being subjected to the fines that are imposable on offenders.
If you need any help in determining your status, or need some advice in completing your tax returns, please give us a call on 020 8545 7600 or email me at email@example.com.