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eBay sellers could face huge tax bills from HMRC

by Thea Coates Finance Reporter
30th Dec 24 12:15 pm

eBay sellers could be facing huge tax bills from HMRC if they donโ€™t register for self-assessment by the end of the year, say leading audit, tax and business advisory firm, Blick Rothenberg.

Fiona Fernie, a Partner at the firm, said: โ€œNow that winter is upon us, we are well over half-way through the first year of the online sales platform reporting regulations, meaning platforms such as eBay, are now required to report details of sellers who have used their services in 2024 to HMRC. The first deadline for filing these reports is 31 January 2025.โ€

She added: โ€œHMRC will compare the reports they receive with their self- assessment records to determine if online sellers have paid the correct amount of tax on the income or gains received.ย A failure to register can result in penalties of between 20% and 70% of the tax due where HMRC judge the behaviour to have been โ€˜deliberate but not concealedโ€™ plus significant interest charges where tax is paid late.โ€

Fiona said: โ€œIn the UK, the deadline for registering for self-assessment was 5 October 2024 for any trading income received in the 2023/24 tax year. Given the first 3 months of 2024 fall into both the new reporting regime and the 2023/24 tax year, those who have been trading online and have not declared their income have a high risk of being discovered by HMRC. However, while the deadline for registering for self-assessment has technically already passed, those affected should still contact HMRC as soon as possible to register sine it is unlikely that there will be any adverse repercussions as long as they file their tax returns by the 31 January 2025 deadline.โ€

She added: โ€œIn cases where no return has been filed it will be extremely easy for HMRC to prove that a taxpayer has failed to notify their liability to income tax. Where taxpayers have been sent a tax return but not included some or all of their trading income from online platforms, it will not be a complicated exercise for HMRC to check for discrepancies and penalise where there have been errors in returns.โ€

Fiona said: โ€œFortunately, for the small-scale seller of goods, there is an exemption from tax where gross trading receipts in a tax year do not exceed ยฃ1,000, although they still must report their trading income on their tax return. Individuals with income above the ยฃ1,000 threshold would be wise to seek advice as to whether their online activities actually constitute operating a trade, or if it would be more appropriate to treat the activity as giving rise to a capital gain.โ€

Eve Williams, GM of eBay UK said, โ€œeBay is complying fully with the new reporting rules in the UK and elsewhere. However, there has been a lot of confusion and misreporting about the new rules.

“As HMRC has said, there is no new tax liability here, no new โ€˜side hustleโ€™ tax. And consumers who are simply selling unwanted possessions are unlikely to have to pay any tax at all,โ€ said Eve Williams, General Manager of eBay UK. โ€œNearly a quarter of UK households are sitting on unwanted items worth more than ยฃ500, and these adults sitting on โ€˜cash in the atticโ€™ should not be deterred from selling online.

“Now that itโ€™s free to sell on eBay*, this is not just a great way of making some extra money โ€“ itโ€™s also good for the environment as these items would otherwise end up in landfill.โ€

Angela MacDonald, HMRCโ€™s Second Permanent Secretary and Deputy Chief Executive Officer said, โ€œWe cannot be clearer โ€“ if you are not trading and just occasionally sell unwanted items online โ€“ there is no tax due.

โ€œAs has always been the case, some people who are trading through websites or selling services online may need to be paying tax and registering for Self Assessment.”

Please find attached a myth busting factsheet for understanding taxes on digital platforms. Please submit any questions to me or [email protected].

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