Selling things online - HRMC, capital gains tax vs income tax

[BarrieJ]

Just an observation regarding HMRC taking an interest in 'private traders. Back in the 1970's I worked for the company that published Exchange and Mart, we'd get advance copies on Wednesday afternoons. There was money to be made by buying under valued 'stuff', most particularly cars, by getting in your calls on Wednesday before E & M hit W.H.Smith's on Thursday morning. We were warned that the Inland Revenue had subscriptions to E & M and routinely looked for regular repeat private advertisers. So if you were going to buy from there, sell elsewhere, or stick to the five car limit.
So, nothing new here; it's just a pity HMRC didn't take a closer look at politician's blind trusts and offshore investments. Zahawi was/is by no means the only offender. People talk of exploiting 'loopholes'. There are no loopholes, simply tax law, written specifically to achieve the results favoured by the rich and powerful.

 

[Pigeon_Droppings2]

I think you still need to fill in a tax self-assessment if you go over £1000 in sales.

I already do one anyway so this is just another box/section that needs filling in...not really a big deal for me.

Where people need to be very careful...the self assessment is also a tax declaration I think!

Useful summary here...I think there's confusion between income and gains on here.

‘eBay Tax’ – the tax rules for selling online

If you sell items online you may be liable for the so-called 'eBay Tax'. We take a closer look at the tax rules for online selling.

www.thp.co.uk

 

[Craig-SM]

Surely if it's paid for using personal money (ie not business or self employed money) then it's owned personally...and the sale comes under CGT?

Also if my total sales in a year are less than the annual CGT allowance I'm not going to stress I think.

No. Using personal money is exactly what a sole trader is as they have no legal separation to business they conduct unlike a limited company.

 

[sg66]

HMRC have many tools and ways to gather much information, the following doesn't even scratch the surface.

Where as once cash was king and physical checks by actual people were required, algorithms are able to trawl through piles of digital info 24/7.

General description of the measure.
The measure will provide HM Revenue & Customs (HMRC) with a power to require
merchant acquirers to provide bulk data about business taxpayers, in order to identify those
who do not declare their full sales.

 

[ukracer]

That's great and if he spreads the sales across multiple platforms you may get away with it, sell 30 cars on eBay, your a trader.

He kept getting personal requests for the cars he had...

 

[Pigeon_Droppings2]

No. Using personal money is exactly what a sole trader is as they have no legal separation

I know (less than) zero about sole trader rules I'm afraid so I'll take your word for it....don't they still have to decide whether items are inside/outside for trading profits and tax calculation?

 

[addjunkie]

No. Using personal money is exactly what a sole trader is as they have no legal separation to business they conduct unlike a limited company.

But there are advantages too….say you make a loss….that loss reduces your tax burden from employment. You buy tools or plant, they are tax deductible. Any milage running about to buy bits is a cost and tax deductible…..if theres a chance your going to flip something, just keep records, costs soon rack up.

 

[sg66]

He kept getting personal requests for the cars he had...

Makes no difference if Elton John wants to buy them.

 

[Craig-SM]

I know zero about sole trader rules I'm afraid so I'll take your word for it.

Don't worry, most sole traders don’t understand the rules either.

But there are advantages too….say you make a loss….that loss reduces your tax burden from employment. You buy tools or plant, they are tax deductible. Any milage running about to buy bits is a cost and tax deductible…..if theres a chance your going to flip something, just keep records, costs soon rack up.

That is correct but not what I was correcting. What you are describing is just keeping track of costs and what many businesses fail to do and wonder why they made so little profit after so much hard work.

 

[sg66]

But there are advantages too….say you make a loss….that loss reduces your tax burden from employment. You buy tools or plant, they are tax deductible. Any milage running about to buy bits is a cost and tax deductible…..if theres a chance your going to flip something, just keep records, costs soon rack up.

Tax man/ woman/ he/ she /they/ it, ain't stupid, guarantee as soon as you try to off set personal sales loss as a business loss it will no longer be allowed and it won't be available for tax purposes

 

[Shedendman]

Ebay dont pay tax
Amazon dont pay tax
Etsy dont pay tax
list goes on etc etc etc
Lets bat the ball in their court and b***h about that

 

[sg66]

Ebay dont pay tax
Amazon dont pay tax
Etsy dont pay tax
list goes on etc etc etc
Lets bat the ball in their court and b***h about that

They all pay tax, they are just better at avoiding it than HMRC are at claiming it

You can't blame them for the rules they stick to. Joe blog on the street is an easy target and does not have the same ability to keep HMRC tied up in an argument then come to a mutual agreement, don't believe me try it out see how it goes, I've run fowl of them in the past there is only one winner in that game.

 

[addjunkie]

Tax man/ woman/ he/ she /they/ it, ain't stupid, guarantee as soon as you try to off set personal sales loss as a business loss it will no longer be allowed and it won't be available for tax purposes

I can assure you it does work….thats what been a sole trader is all about. You pay tax on your total net income…so hypothetically…your salary is good and you pay 15 k in tax….you also run a bit on the-side doing cars….you buy a lift, you buy tools, you buy a compressor, you buy spray guns…and do 1000 miles at45 p per miles running about buying stuff for the cars and the car….the upfront costs will be a loss against your total income, generating a tax rebate in your first year. You finish the car and sell it. Youve got additional income in your second year, you then buy your next project, in effect reinvesting you capital, youve now not made a profit, start again more tools, and then flip it. They cycle goes on…the key is to keep very good records, it is worth the effort. We run two business and I pay tax on my pension. One business does well, the other will always run at a loss, one offsets the other. Im in a partnership with my Mrs so share losses for best tax advantage.

 

[Shedendman]

the other will always run at a loss

 

[sg66]

I can assure you it does work….thats what been a sole trader is all about. You pay tax on your total net income…so hypothetically…your salary is good and you pay 15 k in tax….you also run a bit on the-side doing cars….you buy a lift, you buy tools, you buy a compressor, you buy spray guns…and do 1000 miles at45 p per miles running about buying stuff for the cars and the car….the upfront costs will be a loss against your total income, generating a tax rebate in your first year. You finish the car and sell it. Youve got additional income in your second year, you then buy your next project, in effect reinvesting you capital, youve now not made a profit, start again more tools, and then flip it. They cycle goes on…the key is to keep very good records, it is worth the effort. We run two business and I pay tax on my pension. One business does well, the other will always run at a loss, one offsets the other. Im in a partnership with my Mrs so share losses for best tax advantage.

As a sole trader the bit on the side is irrelevant your it. if your paying 15k in tax, that's a fair profit, your other business is losing 14k I presume, partnership just limits liabilities of business to a percentage of each partner, tax is paid on any profit made, I am a sole trader btw and I've just paid a lump of CGT.

 

[Craig-SM]

I can assure you it does work….thats what been a sole trader is all about. You pay tax on your total net income…so hypothetically…your salary is good and you pay 15 k in tax….you also run a bit on the-side doing cars….you buy a lift, you buy tools, you buy a compressor, you buy spray guns…and do 1000 miles at45 p per miles running about buying stuff for the cars and the car….the upfront costs will be a loss against your total income, generating a tax rebate in your first year. You finish the car and sell it. Youve got additional income in your second year, you then buy your next project, in effect reinvesting you capital, youve now not made a profit, start again more tools, and then flip it. They cycle goes on…the key is to keep very good records, it is worth the effort. We run two business and I pay tax on my pension. One business does well, the other will always run at a loss, one offsets the other. Im in a partnership with my Mrs so share losses for best tax advantage.

The offset of losses is correct but the description of how you’re achieving the losses could easily be challenged by HMRC

“Under the Income Tax Act 2007, s 66, a business must be trading on a commercial basis with a view to making a profit. If losses are made the challenge from HMRC is usually based on the presumption that the business never operated on a commercial basis and was built as such that it would never have made a profit.”

https://www.taxjournal.com/articles/richard-murray-v-hmrc-22042014

Trading loss relief: is the trade ‘commercial’?

Mark McLaughlin explains the ins and outs of claiming trading loss relief HMRC is not slow to tax the profits of a trader; conversely, it can sometimes

www.accountingweb.co.uk

 

[sg66]

The offset of losses is correct but the description of how you’re achieving the losses could easily be challenged by HMRC

“Under the Income Tax Act 2007, s 66, a business must be trading on a commercial basis with a view to making a profit. If losses are made the challenge from HMRC is usually based on the presumption that the business never operated on a commercial basis and was built as such that it would never have made a profit.”

https://www.taxjournal.com/articles/richard-murray-v-hmrc-22042014

Trading loss relief: is the trade ‘commercial’?

Mark McLaughlin explains the ins and outs of claiming trading loss relief HMRC is not slow to tax the profits of a trader; conversely, it can sometimes

www.accountingweb.co.uk

I think there is some confusion over what CGT actually is, you buy a car, that's stock, it does not attract CGT, you buy a digger that's plant and a business asset then sell that for more ohh hold on good luck.

 

[Craig-SM]

I think there is some confusion over what CGT actually is, you buy a car, that's stock, it does not attract CGT, you buy a digger that's plant and a business asset then sell that for more ohh hold on good luck.

Buying a car to resell is stock just same as any other item that is intended to be sold at a profit.
A JCB is a capital expenditure and would be used over a period of time and then sold when no longer required. On purchase of the JCB you would claim capital allowance on it at either the annual rate for the type of asset or even 100% if qualifying for annual investment allowances. These capital allowances are offset against the trading profits reducing the taxable profits and income tax liability.
When you sell the JCB if the value was less than you’d claimed in capital allowances you claim a capital allowance on the difference that again you offset against your trading profits. If the sale was for more you incur a charge for the difference that is added to the profit increasing the amount of income tax payable.
CGT wouldn’t come into it and if you have then you’d be using CGT allowance that you wouldn’t be entitled to.

 

[Craig-SM]

Balancing allowance and charges is the name used for difference in sales of asset against capital allowances claimed. I couldn’t remember the technical names for them when typing the reply.

 

[Pigeon_Droppings2]

If I buy an asset for personal use using net income (ie income which has had income tax deducted)... can that ever be classed as anything other than a personal asset?

Interested to see if I'm missing something here. I can see there's lots of detailed discussion...but mostly it seem to relate to either trade or business assets which have been purchased with some sort of pre tax income / revenue...not interested in these as they're already covered in my case.