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Introduction »
Internet Trading - do you have anything to declare?
In a bid to target those who are not paying the correct taxes HMRC have recently announced further specific target areas, one of which is internet trading.
Selling on eBay and other similar websites is by no means new. However, HMRC are now more able to target these types of operations. Those who regularly buy with a view to selling need to be aware of the rules and the factors HMRC use to determine whether someone has a business.
Certain indicators known as ‘badges of trade’ are used to decide whether or not someone is in business and equally apply to those selling at car boot sales or through the small ‘ads’ in the paper.
These indicators have developed over the years in the courts and nine such indicators or badges are included below. These are used to decide whether a trading business exists or not.
Profit seeking
motive |
An intention to make a profit
- supports trading. |
The number of transactions involved |
Systematic and repeated transactions
- supports trading. |
The nature of the goods sold |
Are the goods only capable of being turned to advantage by being sold? Or do they yield income, or give enjoyment through pride of ownership? |
Existence of similar trading transactions |
Was this a one off transaction or part of a pattern that suggests trading? |
Changes to the goods |
Were the goods repaired, modified or improved to sell them more easily? |
The way the sale was carried out |
Were the goods sold in a way that indicates trading, or to raise cash in an emergency? |
The source of finance |
Was money borrowed to buy the goods? Were any profits to be used to repay the loan? |
Interval between purchase and sale |
Goods being traded are usually bought then sold quickly. |
Method of acquisition of the goods |
Goods acquired by an inheritance, or as a gift, are less likely to be the subject of trade. |
HMRC confirm that you are not trading if you:
- sell occasional, unwanted personal items through internet auctions or classified advertisements
- attend a car boot sale once a year to sell unwanted household items.
As a decision can only generally be made by considering a combination of these factors, please do contact us to review whether your activities do constitute trading and how we can assist you.
Introduction »
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