It's been on the cards for a while but finally the Taxman has launched his campaign to raise tax from those who sell on sites like eBay and Gumtree. So if you've flogged your motor or an old mobile online, should you be worried?
Over the last few months the Taxman has been identifying those who use Internet sites to advertise and sell goods or services. If he catches you before you contact him then you could be in line for harsh penalties. If you're not trading he is not interested: but what counts as trading?
The taxman provides some brief and sometimes misleading guidance but rather than giving a firm view he suggests if in doubt contact an accountant. There are a few basic principles which should enable you to make a decision as to whether you are trading or not.
Principle 1 - personal items
If you bought something for personal use and later decided to sell it, this doesn't count as trading.
Principle 2 ' frequent sales
Frequency of sales is no indication of trading. For example, if you sell your Xbox games after two weeks of owning them the personal use test makes these non-trading transactions no matter how frequently they are. Conversely, a single sale can be trading income. For example, if you spot a job lot of old electronic games and you realise you can buy at a bargain price and sell at a profit, that is trading.
Principle 3 ' Intention to make a profit
The Taxman suggests if you make things and sell them you're probably trading. This description could apply to someone who sells things they make for a hobby.As a rule of thumb you must have an intention to make an overall profit for an activity to count as trading.
If you've been trading but this started in 2011/12 the Taxman's campaign doesn't affect you. The normal rules allow you until October 5 to notify him without penalties applying. However, if your profits exceeded the NI lower limit, an earlier deadline applies.
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