Ebay Users to Face Tax Clampdown

Ebay users to face tax clampdown: an overview of the changes and what to do if you think you may be affected

HM Revenue and Customs (HMRC) have recently announced that there will be a clampdown on traders avoiding paying tax on goods they have sold via the online auction site, Ebay. Legally, people who trade as a business on Ebay should declare their earnings to the tax office and, where applicable, register and declare any VAT. Around 32,000 people are expected to receive a letter if they are suspected of having not paid the correct amount of tax. According to a HMRC spokesperson, ‘People who only sell a few items and who are not traders are unlikely to be liable to tax and will not be targeted by this campaign’. The move is therefore likely to have an impact on businesses using Ebay to sell products, as well as sole traders using the site regularly.

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Trusted Site…
Ebay released a statement showing their dedication to compliance, saying, ‘We want to be a trusted site. We give every detail of responsibility and cooperate with tax and law-enforcement agencies to make sure the site remains trusted’. Ebay has become a particularly popular way to sell online for businesses due to the low costs and the high number of users searching the site for bargains every day. Companies selling everything from computer accessories to hair extensions have found success via Ebay.

Tax Amnesty…
There will be a short amnesty period allowing traders who have evaded tax to receive reduced penalties if they come forward. However, if they do not make efforts to rectify the situation, many could be liable for higher fines and even criminal prosecution. The HMRC spokesperson said, ‘There is a significant minority not paying all that they should and we are encouraging those people to come forward now, get their tax affairs straight, and benefit from the best possible terms’.

This is the latest move by the government to regulate the money earned by sole traders who may have traditionally avoided paying tax. Avon representatives, personal trainers, teachers earning extra from private tuition and tradesman including electricians and plumbers are also said to be coming under greater scrutiny.

The move highlights how easy it can be to fall foul of the law if you do not have an in-depth understanding of your legal responsibilities or take advice from accountancy professionals.

Seek Professional Advice…
If your business trades via Ebay or if you are an individual earning a considerable extra income by selling goods online, it is recommended that you seek professional advice from an accountant to ensure that you are paying the appropriate taxes. A simple consultation could provide you with all the information you need about complying with the relevant legislation and putting plans in place going forward to avoid further problems later down the line. Arranging to see an accountant as soon as possible will give you extra peace of mind and allow you to focus on the day to day running of your business, without the worry of legal action or non-compliance.

Lee Peet blogs about personal and business tax issues. He runs Worcester accountancy firm, Modern Accountancy and tries to help people to understand and navigate the tax minefield.

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