How can I work out if I am 'trading' online? - Your Questions Answered:


In response to yesterday's post regarding HMRC's e-marketplace campaign, several people contacted us to ask how they could tell if they were trading online. Below are some questions, posted by HMRC, which should help you to determine whether you should be paying tax or not:

Money Question Mark

If you occasionally sell a few personal possessions to raise some cash then you are not trading and you won't usually need to pay any tax.

However, if you regularly sell goods or services online, particularly on eBay, then you are almost certainly trading and will have some tax liabilities. Another easy way to determine whether you need to pay tax is if you are selling to make a profit. If you are, then you will need to register for tax with HMRC.

The following questions posted by HMRC should help you decide whether you meet the taxman's rules for trading.

Looking at all eight questions below, if your situation is more like answer A than answer B in any of the questions then you are probably trading and should notify HMRC of your intention to disclose:

Question 1: How, and why, did you get the things you're selling?

Answer A: you bought them so you could sell them again to try to make a profit.

Answer B: you're selling personal possessions you don't want anymore, or things given to you or inherited.

Question 2: How often do you sell things?

Answer A: you make regular sales.

Answer B: you have only ever made one sale and you don't think you will make any more.

Question 3: How do you sell?

Answer A: by registering as a business seller or as an online shop with an internet auction site.

Answer B: when you have something you want to sell you advertise it, but you don't sell enough to make it worth setting up as a business user or shop.

Question 4: Do you change or improve the things you're selling?

Answer A: you mend or change the things you buy (that might include splitting things up into smaller quantities), so you can make more profit on them.

Answer B: you sell things as they are because you just want to sell them quickly.

Question 5: How quickly do you sell things?

Answer A: you sell things that you've only just bought and you're hoping for a profit.

Answer B: you've had the things you sell for quite a while.

Question 6: Are you running a business selling similar things?

Answer A: the things you sell are related to your own trade or business.

Answer B: the things you sell are not things you would sell in your own trade or business.

Question 7: How did you pay for the things you're selling?

Answer A: you had to borrow money to pay for the things you're selling.

Answer B: you were given them or you paid for them out of your normal living expenses.

Question 8: If you make the things you sell, do you charge more than they cost you to make?

Answer A: you try to sell them at a price that covers your costs and brings in a profit.

Answer B: you sell things that you make as a hobby and you only want to cover your costs.

If you answered 'A' in any of the questions then contact Mitchell Charlesworth's tax experts without delay, preferably before June 14th, to find out how we can help you under the e-markets disclosure facility. Simply complete a quick enquiry form or call: 0151 255 2300.

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