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HMRC guides UK eBay traders on income tax

Garage sale or dealer?

Internet Security Threat Report 2014

A new guide has been released which tells occasional online sellers if they should be paying income tax on their profits. The guide is designed to differentiate between online traders and people who "are just clearing low value items from the attic".

The phenomenal success of auction sites such as eBay means that a huge number of people are now earning some money by selling items online. Most of those people, though, are simply selling second-hand items for a very small amount of money, and probably do not have to pay tax on those earnings.

"If you qualify as a non-trader, this means you are not buying and selling goods online with the intention of making a profit," says the guide from HM Revenue and Customs. "Are you selling unwanted presents? Do you occasionally sell personal items, such as old vinyl records or a sofa?"

"As long as you are not buying goods with the intention of selling them at a profit, you are not regarded as a trader," it says. "This means you do not have to notify us and declare the income on your tax return."

Some people will qualify as e-traders, though, according to the guidance. "You are trading if: you sell goods that you bought for resale; you make items yourself and sell them, intending to make a profit; you sell or buy goods for other people and receive money for this (for example on commission), or you provide a service and receive payment (in cash or in kind)," says the guide.

"If you are trading online you will be regarded as self-employed for this trade and you must register with us and possibly complete a tax return," it says.

Stuart Hartlib, HMRC's director of risk and intelligence, said sellers should also keep an eye on whether or not they should be paying capital gains tax: "In the new guidance, there are examples to help you work out if you have to pay tax when you sell items online. You can also access information related to online trading about issues such as Capital Gains Tax and VAT.

"This site is designed to make registering and paying tax easier, so you can work out whether you are self-employed and need to file a return," he said.

Not everyone who counts as a trader will be aware of their status, said the guide. "You may be self-employed and do not realise it. If you are self-employed, you must register to let us know within three months of starting your business, or you could pay a penalty. It's the law," it said.

See: The guide

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Internet Security Threat Report 2014

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