Are you an eTrader?
Time was, the world of online trading was ruled by professionals. Today, the picture is quite different with homemakers, retirees and students amongst those making regular sales over the web. Recent research shows that over 50,000 people in the UK draw a large portion of their income from this source, though exponential growth in this area means this may already be a huge under-estimate.
Whereas Internet vendors appeared at one time to be individuals selling single used items, many now offer brand new goods in multiple numbers. Was anyone really likely to have been given 10 of the latest model playstations for Christmas? And that's before you get to concert tickets appearing for prices several times their face value on the first day of sale. At anyone time, there are millions of items for sale on Internet auction websites, across thousands of different categories.
HM Revenue & Customs (HMRC) have recently launched a new guide for people who sell goods on line. Go towww.hmrc.gov.uk/findout. The guide discusses what constitutes online trading, the taxes that eTraders are required to pay, how to register as self-employed, etc.
You are likely to be trading if:
you sell goods that you have bought with the intention of resale
you make items yourself and sell them intending to make a profit
you sell or buy goods on behalf of others for financial gain (or commission)
you provide a service and receive payment in cash or kind.
If one or more of the above apply, you may need to pay income tax and national insurance contributions on profits made from e- trading, and complete a self-assessment tax return, if you are not already doing so. If the amounts are large enough, you may also need to register and account for VAT.
By way of example, a typical trader making a profit of £5,000 might need to pay tax of £1,000. Someone earning £25,000 will need to pay at least £5000. In both cases there is likely to be national insurance as well. Only if you have no taxable income at all can these amounts be reduced. A personal allowance, currently £6,475, is available to all individuals.
Think you can escape? HMRC is using super computer called XENON which explores the Internet looking for evidence of multiple transactions on trading and auction websites. These can be compared with records for the business. Deny the transactions when questioned and there could be red faces all round. as evidence has been gathered before the questions begin.
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