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eBay sign | accountingweb | ebayers must be good taxpayers

Who wins now side-hustle data goes direct to HMRC?


New reporting rules mean that eBay, AirBnB and other online businesses will soon be spilling the beans on sellers to HMRC. This could be bad news for accountants and their clients.

4th Jan 2024
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Many hungover readers will have noticed that, along with all of those already-forgotten resolutions, New Year’s Day welcomed a big tax story.

As a result of legislative change to incorporate the Organisation for Economic Co-operation and Development’s model reporting rules, with effect from 1 January 2024 businesses across the world are now obliged to notify tax authorities of activity, although the first reports will not need to be filed for a further year.

Translated into simple language for the media, early risers were informed that, in future, their eBay sales activity would be reported directly to HMRC, prompting a suitably scary news story. The message that most would have taken away is that if they sell anything on eBay or any of its competitors or let their home out on AirBnB, the taxman will be coming. There was hope in the additional information that you could make up to £1,000 without worrying.

Drilling down

While some of the headline information was accurate, a degree of fact-checking is in order, since drilling down will demonstrate that some of it must be taken with a pinch of salt.

To start with, this is not a change to tax legislation. If people are liable to tax on income from sales or services that will now be reported to HMRC, they were equally liable in the past.

This could clearly present problems to those who have not declared any income, not to mention professionals who failed to inform them of the need to do so.

Whether returns are awaiting submission during January or have been filed long ago, some of us may feel the urgent obligation to remind clients that declaring all income is compulsory.

Fixed fees

On the face of it, the news that clients might have additional concerns around their tax returns should be good news for accountants. In reality, when so many of us charge fixed fees for preparing self assessment returns, the truth might be somewhat different.

This is one of those situations where extra work will be required but clients might, perhaps naturally, expect that the fixed fee will remain fixed.

That doesn’t mean accountants can escape their responsibilities and many should now be contacting clients to remind them of their obligations to declare what might be described as casual earnings in addition to everything that has previously been included on returns.

Suitably vague

The news stories were also suitably vague when it comes to the difference between trading and clearing the decks as well as the £1,000 exemption. To start with, many would have come away with the impression that this related to what accountants refer to as turnover. In fact, the true measure is profit.

That could be helpful, since in many cases those selling goods on eBay will actually be dispatched at a loss. A couple of examples should aid understanding.

If you purchase an expensive wedding dress on the internet and decide that you only need it the once, the likelihood is that offloading it via eBay will not generate a profit.

On the other hand, if you spot an unbelievable bargain in the post-Christmas sales and buy 50 frying pans for a song then sell each at a 500% profit, that is undoubtedly trading and must be declared in the same way as any profit from an AirBnB letting (subject to any rent-a-room relief).

The £1,000 allowance

The £1,000 exemption also bears deeper consideration. On the plus side, since 2017 individuals have been entitled to take an allowance of £1,000 each from trading profits and net property revenues.

This should prevent many from facing a liability. Technically though they are still obliged to declare the income if turnover (not profits) exceeds £1,000. If this would not lead to a tax liability – for example where all income is covered by the personal allowance – it is still possible to inform HMRC and request that they do not issue a tax return.

Another problem could arise where someone is already in business. They would expect to use up their £1,000 allowance carrying out their primary trade, which automatically means that even £1 of profit from an online sale would be subject to tax.

Minefield ahead

All in all, this is a bit of a minefield. Many might take the view that HMRC has long been unable to deal with excessive workloads and receiving tens of millions of additional pieces of data will add so much to the burden that it will never get round to reviewing all of the supplementary information.

Some at the Revenue might also be less than enthusiastic about one consequence of this change, which could be a large increase in the number of returns filed, without necessarily leading to a noticeable increase in the overall tax take.

Perhaps the greatest danger will come if their computer systems are able to compare information supplied by eBay, AirBnB and so on with returns and launch an automatic query having spotted big holes in tax returns.

Time will tell, but this could be another big headache, primarily for small practitioners and their clients.

Replies (20)

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By FactChecker
04th Jan 2024 14:29

The biggest headache is the lack of clarity - at least in terms of how HMRC perceive the rules (which will in turn be reflected in how any automated processes are set up at their end).

Leaving aside the basic lack of comprehension amongst the 'average taxpayer' regarding whether something is income or a capital gain, HMRC's interpretation of when income is to be treated as derived from 'trading' is ambiguous at best.
All their examples - see published yesterday - assume a world in which people have very short terms of reference, and so can easily work out whether an item has made a loss or a profit.

But, to take an example close to my heart, what about the following scenario:
- taxpayer has been buying records (vinyl type) for over 50 years and now has many tens of thousands of them;
- some were new and some were secondhand at time of purchase / some cost pennies and some quite a lot of pounds each / there are no records (accounting type) of any purchases as this was just a hobby not a business;
- none have ever been sold so far (so no question arises re trading to-date);
- much to taxpayer's surprise, many of these items are currently 'worth' several £hundred each (and some in the low £thousands)!

Of course 'worth' relates to what someone has recently paid for the same item on a website and so may not not be achievable if records are now unloaded onto the market - but, in principle, would selling them (one at a time or in bulk lots) be considered trading even if no further records were bought?

[FWIW no purchase was ever made as an investment (let alone to trade) and most buying was done over 30 years ago ... it is just a personal collection that has suddenly become of immense value and ought to be disposed of before fashions change yet again.]

Thanks (3)
Replying to FactChecker:
Jake Smith, AccountingWEB
By Jake Smith
04th Jan 2024 16:19

Interesting question! There are a few questions that are hard to answer here, would it be income or gains that you'd be generating? Would it be a one off or multiple sales, if the latter, could you be classed as trading for selling them?

I am a terrible hoarder of music, LPs, guitars, as was our dearly departed editor at large John Stokdyk, as far as I know neither he nor I have ever deliberately sold anything like this!

Let me know if you work out whether you're at risk, my Dad also has a large collection, some of which may be quite valuable and there's definitely no room for more stuff at my house!

Thanks (0)
Replying to Jake Smith:
By FactChecker
04th Jan 2024 20:07

Believe it or not, the example I gave was actually a hugely simplified version of a situation that I've encountered (in a non-professional capacity) quite often.
Although it may have sounded extreme, it was but the launching-pad for a near infinite number of questions rising from further variations - such as:

- if you have a near complete collection of something (say P. Eye magazines) and buy the two missing issues from a collector, then when you come to sell the (now dramatically more valuable) complete set ... does that one purchase mean that the sale is part of a trading activity?
[HMRC seem to think Yes - but it may differ depending on your intention at the time of the purchase!]

- you and your father are fellow collectors of the same series of boxed models (thanks memyself-eye) and each possess items that are missing from the other's collection (why waste money buying something that the other already has). When your father dies he doesn't make specific bequests relating to the models, so they go into his general estate (to be shared equally with your siblings). You negotiate with them to ensure all the models come to you during the divvy-up (thereby completing your sets). If you then sell any set, does the estate transaction transform your sale into a trading activity?

- on her death, your mum leaves her massive collection of uncatalogued china & porcelain equally to you and your sister. Possessing better taste than your mum, sis and you split the boxes into 'hers' and 'yours' but leave them in the old barn with the intention of donating them to jumble-sales/charities 'in the future'. Ten years later you reach the boxes stored at the back and notice a blue-and-white bowl looks like something that people were excited about on Antiques Roadshow last month ... and indeed it turns out to be worth slightly shy of £10m. Putting to one side the interesting conversation to be had with your sister, how will HMRC treat the subsequent auction at Sotheby's?

I know of many other similar scenarios (and can imagine even more), so my point was ... if HMRC are making a push on eBay (and other) sellers, they should ensure that their communications & guidance are more fit for purpose in that real but messy world that they fail to comprehend!
Britain is a nation of collectors - most without any danger of 'striking it lucky', but enough to need helpful guidance if the taxman's on the prowl.

Thanks (4)
Replying to FactChecker:
By rmillaree
05th Jan 2024 10:41

I dont think you can ever expect the badge of trade rules to be easy unless the powers that be did a hatchet job to make them more regimented. At the end of the day this individual like many others needs suitable advise with regard to their tax if - some helpful links below

its pretty safe to asume that if peeps have regular income from recent buys and sells are running a trade - so that should all be pretty mechanical. Your example is very untypical but its probably bread and butter for teh specliaist who knows this area inside out - unless they also say its an edge case (which it may be)

Interval of time between purchase and sale
The length of time an asset is held is an important indicator of trade. The longer the period of ownership the greater the chance of it been seen as an investment rather than a trade. HMRC also look at the intention, if you can demonstrate an intention it could indicate the tax treatment. The two key cases on this are Wisdom v Chamberlain – CA 1968, 45 TC 92; [1969] 1 WLR 275; [1969] 1 All ER 332 and Marson v Morton – Ch D 1986, 59 TC 381; [1986] STC 463; [1986] 1 WLR 1343 both mentioned above.

Thanks (1)
the sea otter
By memyself-eye
04th Jan 2024 17:26

Good article. My brother has a large collection of 'James Bond films' themed model cars (Corgi etc) All boxed and unused. Many in expensive wood presentation sets.
I have them stored in my garage - about 600 of them. No original receipts but the lot could sell for £000's at auction.
The discussion with HMRC as to the profit would be interesting......

Thanks (0)
By Postingcomments
04th Jan 2024 19:37

I would say that the posters so far fall into the CGT camp - so should consider the chattels exemption. That's the legislation's answer to the issue of selling small valuables, wondering about what the base cost is etc - it doesn't want to know.

Remember to revise the rules about sets and collections while you're there, as they could well be relevant.

You see. The answer isn't always to fixate on trendy terms the media might use (like "side hustle") then get automatically drawn into the tax rules and debates that might go with that. Start with the facts, then pick out the tax rules that are appropriate to the situation at hand.

Thanks (4)
Replying to Postingcomments:
By FactChecker
04th Jan 2024 20:23

Many of the people now being worried by media sloppiness (no names but the usual suspects with their sound-bite approach to news know who they are!) think that selling anything (even once) is a side-hustle - because it sounds 'glamorous' to their friends.

Some are undoubtedly not reporting what are truly taxable activities (whether through ignorance or deliberate evasion is another matter) ... but many others have no need to report or pay tax on their activities.
Unfortunately HMRC's trigger happy 'nudge' proponents don't care about anything other than doing the bit that happens to work for the least expenditure (the rest of you can 'go hang').

Thanks (3)
By JustAnotherUser
05th Jan 2024 08:21

curious if there's an example of the minimum information companies have to supply?
and what other databases have HMRC have access to so they can validate they have the right person if they're not already in self-assessment?

John Smith, Address, bank account (lets say John uses a separate monzo account just for his ebay sales)
I wonder how good HMRC's 'big data' is to tell if (and in an automated way) other than send a letter to that name and that address....
-Does this John claim benefits
-what is this Johns PAYE
-how much additional likely income John has vs other sources in their system

Other than sending millions of letters out, how they will effectively prioritise these numbers for further enforcement or investigation?

Every time I see judgements in here these take years, I saw a recent one that spanned over a decade.

Other than a letter it looks like if john ignores this letter in regard to his sale of £5,0000 worth of trainers on ebay, John will be fine.

Thanks (0)
By Nebs
05th Jan 2024 10:16

Given that eBay do no due diligence on new buyers/sellers, and are happy for business sellers to register as private sellers (and so not have to accept returns, not have to display their name and address anywhere, and presumably not pay tax) and eBay take a cut of these illicit profits, are eBay guilty of money laundering? If so, the scale of the problem suggests that the size of the fine would wipe out the national debt.

Thanks (2)
By rmillaree
05th Jan 2024 10:20

"All in all, this is a bit of a minefield."

Huh - there is nowt new here. If peeps aint declared income they need to sort whats the minefield ?

Probably a bit of extra potential work - i remember when electicrians first had to specifically register before they could do any sideline work. Quite alot of new clients turned up starying to trade compared to previously but no tidal wave of new work.

Thanks (2)
Replying to Justin Bryant:
By AndyC555
05th Jan 2024 13:38

Noted (if self-appointed) tax 'expert' Richard Murphy has also opined on the matter:

"Selling the odd item occasionally is not trade

Selling small items persistently is"

Obviously both of these statements is wrong as selling one item can be an 'adventure in the nature of trade' and selling lots of items need not arise from a trade. Small wonder the general public get confused.

Thanks (1)
paddle steamer
09th Jan 2024 09:55

Well, for all with a vinyl collection, nip over to Discogs where I gather (from my Brother in Law) you can insert your collection item by item, declare condition etc, and it will give you a valuation of your entire collection. (I think I would have to be very bored to do this but maybe could persuade my other half as she loves creating and playing with a database- how much for "Concert for Bangladesh", near mint, what about her Partridge Family albums????)

Thanks (0)
Mark R
By oneclickapplications
09th Jan 2024 10:39

This is not surprising. HMRC know they are losing out on £m however managing this will be a massive challange. We think the £1000 allowance should be £8000.

Thanks (0)
Replying to oneclickapplications:
By Paul Crowley
20th Feb 2024 19:13

that would mean all self-employed get the equivalent of 60% of an extra personal allowance.

Thanks (0)
By stepurhan
09th Jan 2024 13:08

Article wrote:
This is one of those situations where extra work will be required but clients might, perhaps naturally, expect that the fixed fee will remain fixed.
Why? The fixed fee is based on specific work. More work means more fee. You wouldn't expect a builder to fit a couple of extra windows for free would you?
Thanks (0)
By Nigel1962
11th Jan 2024 12:50

Nothing I have seen so far answers the question around deciding to sell your record collection.

If you have a paid job already and get given a collection or have bought it over the last 20 years from car boots/ friends etc and you decided to sell the records and even fill in a self assessment form to declare the income which would be over £1000 HOW do you classify the 'stock' and can you claim the costs for it on the return if you cannot 100% recall the cost and have no recepts?

The HMRC guidance suggests you can 'estimate' certain things and 'they' will 'decide' upon it being accurate or not.

In all likelihood you would not sell it as one large collection but sell it piecemeal over two or more years. It is not trading per se as you bought the records to listen to and that being the case HMRC say you cannot actually claim for personal items so you are never going to get back the costs unless you inflate your prices to take it into account and then you will go beyond the £1000 mark and HAVE to complete a Self Assessment.

You may be a collector of various things, records and stamps, and coins and decide to offload it all so you would be 'trading' in their eyes for years to come.

Your favourite hobbies will cost you money or get you into trouble it seems unless you can at least claim back the original costs on the self assessment return.

With Self Assessment it seems you are damned if you do it and damned if you dont. I have no problem if I have to fill one in but would like to know exactly what I can and cannot claim on

Thanks (0)
Replying to Nigel1962:
By rmillaree
11th Jan 2024 13:50

With Self Assessment it seems you are damned if you do it and damned if you dont. I have no problem if I have to fill one in but would like to know exactly what I can and cannot claim on

a suitable specialist should be able to sort that out in similar manner as car mechanic would sort out an issue with a car that you couldnt fix yourself.

Thanks (0)
By Paul Crowley
20th Feb 2024 19:05

'This could clearly present problems to those who have not declared any income, not to mention professionals who failed to inform them of the need to do so.'

You have a habit of accusing accountants of tawdry activity. Why? Did you once have a crooked accountant (if so then your fault for not doing any due diligence) or do you just have an irrational bias

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