eBay TAX and VAT Guide

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I am in the middle of writting an ebook on TAX, VAT and eBay but as an overview of this subject:

Is eBay taxable as AN income?

In general if you are purchasing products to sell at a profit you should be registering on eBay as a Business Seller and declaring to HMRC as self employed usually as a sole trader, keeping records and receipts and keeping 20% approx back for the 'TAX MAN'.  It does not make a difference if you have another job working for a company whether that is part-time or full-time you are still legally allowed to be self employed as well although you employment contract may state you are not allowed to work for anyone else including being self employed.

HMRC use tests called badges to help identify trading as a business. The following "badges" are applicable to frequent eBayers who are enjoying an income online:

  • Profit seeking motive - an intention to make a profit.
  • A systematic number of transactions.
  • Transactions are similar to those of an existing trade carried on by the seller.
  • The asset is sold in a way typical of a trading organization.
  • The asset is brought and sold within a quick space of time.
  • The asset is purchased in order to resell it.

The fact that eBay’s listings are computerized means that HMRC should be able to get their hands on a rather useful audit trail for each seller. The seller’s problem may be that he has not kept decent records his end of the purchase price of the item and actual post and packing costs.

Do I need to charge VAT on my eBay sales?

You need to register for VAT if your taxable turnover exceeds £58,000 p/a.  If this is the case you will be legally bound to charge VAT at 17.5% on your sales and make quarterly returns to HMRC. Although there are significant penalties if this is ignored. On the plus side you will be able to claim back the VAT you pay on your expenses such as Petrol for your car when driving to the post office, Broadband fees, eBay fees etc.

By: Roger Cater

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