32,500 eBay traders should expect an HMRC delivery

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32,500 eBay and online traders will start receiving letters from HMRC today asking about their online selling activities. The letters are being sent to people who are trading on what HMRC call “e-marketplaces” but you can bet your life that mainly means eBay.

If you’ve been selling online regularly (or even not so regularly!) and HMRC believe you may not have paid any tax owed then you’ll be getting one of the HMRC letters in the mail today or soon.

If you do get a letter, then don’t panic. Although you’ll have to pay the back taxes you owe (if any) it’s still not too late to avoid the fines.

Firstly, if you’re selling personal items to raise some extra cash then HMRC aren’t interested in you. However, if you sell services, buy stock to sell, or improve items and then sell, they’ll want to talk to you. You’ve still got until the 14th June 2012 to get in touch with HMRC and if you voluntarily contact them then:

  • You may only have to pay for a maximum of six tax years
  • You can tell HMRC how much penalty you should pay (Choice of 0%, 10% or 20%)
  • You may be able to pay what you owe by installments

This move shouldn’t be a surprise to anyone trading on eBay. Tamebay reported the HMRC campaign to encourage online sellers to pay their dues back in March and eagle-eyed sellers will have spotted banners on eBay itself encouraging compliance (see above).

If you contact HMRC by the 14th of June then they’ll leave you alone until the 14th September by which time you need to have made full disclosure and paid any back taxes owed. However if you miss the 14th June deadline be prepared for them to start chasing you hard, impose higher fines and penalties and not give you time to get your paperwork in order.

Most important of all if you get a letter don’t ignore it! If you’re only selling personal items get in touch with HMRC and let them know and be prepared to justify yourself. If you are trading it’s time to get your accounts in order and don’t forget if you’ve made little or no profit you may simply have to complete your back tax returns but still have no tax to pay.

Finally if you’re in a mess with your tax speak to an accountant and get some help putting your affairs in order. The sooner you get your tax affairs in order the sooner you can stop panicking.

28 Responses

  1. Thank you for the heads up Chris, I personally think HMRC has done a great job preparing sellers for this with their e-marketplaces campaign.

    Making sure all sellers are paying the right tax contributes to a fairer marketplace for everyone.

  2. I’ve been submitting my tax return for my eBay business for five years now. Do readers of this thread think that HMRC will make the ‘connect’ between my eBay listings and my submitted tax returns, or will I have to phone and convince them?

    Knowing the lack of joined-up thinking in Government organisations, I suspect it’s going to be the latter…..

  3. though we think hmrc are not doing enough to collect the tax they could from ebay sellers in their defence, it
    could be they would have the same problem as police and courts if they prosecuted every speeder or spliff smoker

  4. Dragon, you are right but the thing is that in this case there’s money involved; a financial incentive for them to chase people 🙂

  5. Having sold about 30 items on Ebay this past year or so, I’ve been keeping an eye on the postie for the dreaded brown envelope 🙂

  6. That’s just it, no one really knows what the criteria is that would warrant a letter 🙂
    Australian sellers had to have 200 transactions totaling more than $20,000 before the taxman came chaing them.
    Hard to imagine that there are 32,500 UK ebay sellers getting anywhere near that volume!

  7. Letter? What letter? My shredder is attached to the back of my letterbox so I don’t get any letters…….

  8. Don’t I remember hearing that if your cat or dog savages the Posties fingers as he pushes the letters through your letterbox they stop delivering to you. They require you to go and collect the post from the sorting office instead. If they do that for a dog or cat just imagine what they would do if the postie got his fingers in your shredder!!!!

  9. It’s nothing to be afraid of, really; you can put loads of things on your tax return as expenses, which in most cases reduces if not negates any tax liability.

  10. What about Ebay sellers operating from Thailand?

    Are they liable for UK Taxes?

  11. What could they do about them though?
    I would imagine they would be nigh on impossible to track down.

    Still, with sales volumes like that (and I’m sure they aren’t the only seller bending the rules like that) it may be a worthwhile pursuit

  12. We have had our letter and its incredibly well written. They talk about identifying sellers through the level of feedback and it also encourages grassing other sellers you feel may not be paying the right amount of tax. Well done HMRC!


  13. Not sure why duplicated messages appear to fill up the page?

    Remember that although we are liable for business activity profit taxes to HMRC, you can claim all the expenses incurred against your gross profits.
    This includes cost of stock, expenses running the business ie ebay and paypal bills, postage, sundries, computer paper and ink and a portion of your household bills relevant to the room in which you operate your business activities.


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