Ask around and you’ll soon discover that the vast majority of people have dabbled on eBay and used this network to sell unwanted items.
However whilst for most of us we use eBay occasionally to source out items (at a cheaper price) or sell unwanted/ worn toys, clothes and gadgets, for a select few eBay has become a big part of how they make their income.
In fact there are some companies who use eBay as a place to sell and market their products.
How can this affect you tax wise?
Now this is the problem – not a lot of people or even businesses recognise that regular trading on eBay can lead to tax implications and as such, there are a growing number of people who are facing penalties/fines for using eBay as a source for money.
Luckily it is possible to find out what your tax liabilities are and ensure that you are not accused of tax avoidance by the HMRC.
Take the following information for example:
- Since 2003 eBay has been legally obligated to charge VAT on seller fees to those who live, have a permanent address or are established in the EU (this starts at 15%)
- If you are a business using eBay to sell products you may have to be VAT registered (the VAT threshold is £61,000). The best way to determine whether you need to register is to visit the HMRC website. They can provide you will a full list of guidelines, exceptions and the latest VAT rates.
- Some of the items you sell on eBay may need VAT adding to them before you sell. Again, the easiest way to determine if VAT needs to be added is to visit the HMRC, review their list (including items which are exempt) and also make use of their Duty and VAT liability calculator which will enable you to work out potential tax liabilities for selling products internationally.
Other things to note:
- If you are VAT registered and have determined that an item needs VAT adding, you must clearly state the percentage amount that will be added to the listing and ensure that the buyer is aware of it before they agree on a price. If you fail to tell the buyer about VAT you cannot charge the buyer. Instead you will have to pay VAT on the item yourself.
- Falsifying information to avoid paying VAT can result in civil fines and criminal prosecution.
- Selling personal items or things that have been in your possession for a long time e.g. books, CDs, toys etc does not class a trading. Trading occurs when you sell products (often that you have made) with the purpose of making a profit. In this instance you will need to inform the HMRC about your trading and keep records of all your transactions. NOTE: you won’t need to register for VAT if your profits are below £61,000.
- Purchasing items with the intention of selling them on for a profit is viewed as trading.
- Once you are viewed as ‘trading’ this means you will also be liable for Income Tax. Now the amount you are taxed will depend on what you earn so to ensure you pay the correct amount it is important that you complete a Self Assessment.
It is important to note that even if you are not trading there will be circumstances where you are liable for Capital Gains Tax.
For instance, if you were to inherit a valuable painting worth more than £6,000 off a relative and sell it at auction, whilst it is not classed as trading, you will have to pay CGT.
Similarly, depending on the items you are selling, how often you trade and the profits you make – each can affect the amount and types of tax you have to pay. For this reason it is wise to consult with a chartered accountant as they can provide you with the knowledge, the resources and the advice you need to pay the right amount of tax at the correct time.
Following weeks of celebrities being revealed for paying as little as 1% on their income tax (Jimmy Car, Gary Barlow), parliament has decided to launch an in-depth investigation into the rising problem of tax avoidance in the UK, and put a stop to these tax loopholes.
According to reports, the House of Common Public Accounts Committee is going to assess and review the work of the taxman to see how tax rules are being flouted to help high earning professionals and celebrities escape paying their fair share of income tax.
In particular, parliament plans to bring the HMRC before MPs to explain how they are tackling these evasions.
The fact that during 2009-10, the HMRC calculated a tax gap of £35 billion – the equivalent to 8% of all tax due – and wrote off £10.9 billion as being ‘uncollectable’, means the general public are being made to foot the bill for billions of pounds every year.
What problems does this create?
Whilst tax avoidance schemes are enabling the wealthy to enjoy more of their profits, the bill for this avoidance is causing the rest of the country to pay more in taxes which is causing many to struggle financially.
However, if everyone were to pay their fair share of taxes, the government believes they would be able cut the basic rate of tax by 2p per pound – a significant difference, especially for those on a lower income.
How can your accountant help?
Whilst we all don’t want to pay too much in taxes, by enlisting the help of a chartered accountant, they can help you to legitimately reduce your tax liabilities whilst keeping with the law.
With the right tax planning, investment and advice, it is possible to lower your taxes but ensure that what you are paying is right and reasonable.
Managing your accounts and taxes is not always an easy business, especially if you have chosen to handle them yourself. For this reason, it is always good to know where you can go to, to receive quality tax advice. With this support you can ensure you are paying the right amount, on the right taxes at the right time.
And surprisingly there are various sources you can go to – both free and for a small fee. Take a look at the following:
- HMRC – alongside sitting down with an accountant, the HMRC are one of your best sources for tax advice, as not only is their website incredibly detailed and easy to use, but you can generally speak to their advisors for free (although in some cases you may be asked for a fee).Jump on their website and you can quickly find out more about Income, inheritance and Corporation tax as well as a guide on how to fill in a self assessment form.
- Citizens Advice Bureau – this free service is ideal for learning more about your rights and responsibilities as well as the potential benefits and reliefs you may be entitled to.Please note: their knowledge is more focused on housing, debt, property and your income, so if you need advice on your business, paying inheritance tax or finding funding to invest, then you will be better off speaking to an accountant.
- Tax Aid– a UK charity dedicated to providing free tax advice to those who cannot afford a professional, this charity can help you to deal with tax debts, find out if you are paying the right tax and show you how to fill in a tax return.Particularly focused on helping those on low incomes, business owners may be better off speaking to a professional about potential corporation tax and tax liabilities.
- Direct.gov– this website offers a diversity of guides/services including a section on how to deal with taxes.From self assessments to national insurance to taxes (income, inheritance etc) to pensions, savings, tax refunds and working abroad; Direct.gov can help you to gain a stronger understanding on how to deal with these areas and approach them.
- Chartered accountants– for the best tax advice, it is always wise to go speak to an accountant. Whether you need advice about your personal finances or your business, chartered accountants can not only help you to recognise your tax responsibilities (and provide you with the necessary advice to deal with them) but they can help you to lower your liabilities, find you funding and offer you strategies to improve the profitability of your business.In truth, their service offerings are vastly bigger and more focused towards your accounts, so whilst you will have to pay a fee when you hire them it will be well worth it.And with their free business appraisals, you can first test out their service (and what they can potentially do for you) before you hire them.
Out of these 5 groups, your safest option when it comes to dealing with your taxes is visiting an accountant. Whilst the other 4 can provide you with valuable advice and information, in the long run only can an accountant tailor this information to suit your best interests and needs.
So if you are looking to receive quality tax advice, why not speak to a chartered accountant? With their qualifications and industry knowledge you can ensure you are paying the right amount on your taxes.
Owning a business in Scotland could potentially lead to lower tax liabilities should the Scottish Parliament succeed in creating their own Revenue (Revenue Scotland) by 2015.
Having rejected having the HMRC administer and collect devolved taxes, they have decided to create this body to help ‘serve the needs of the Scottish people at a lower cost than the UK’.
What will it be in charge of?
With the powers to levy stamp duty land tax and landfill tax being devolved to Edinburgh by 2015, the Scotland Revenue plans to first focus on these 2 taxes by working alongside Registers of Scotland.
However, it has been revealed that the HMRC will continue to be responsible for administering and collecting income tax, even after the Scotland Act is finalised.
How will this affect your accounts?
2015 may feel like a long way away; however should you own a business in Scotland it would be unwise to wait until this Revenue has been created before acting.
With the HMRC remaining responsible for income tax, it is important that you make sure you are aware of which Revenues of responsible for what. For instance, send your income tax details to the Scotland Revenue (not the HMRC) and you could potentially incur fines.
For this reason it is important that you employ a chartered accountant who is update with UK and Scottish legislations and who knows which of these are responsible for each of your taxes to ensure you pay the correct rates to the right Revenue.
With their help and guidance, they can help you to navigate these 2 revenues and make sure your forms are never late.
If you have ever wondered how much income tax and national insurance you pay, and where it is sent to, then the Treasury’s new tax calculator should allow you to do just that.
Available from the Apple Store, Google Play and the HM Revenue and Customs website, this calculator is the first stage of a new process that will allow the government to send all taxpayers a precise statement of how much tax they pay and where it is sent by 2014-15.
By giving taxpayers this information the Treasury hopes this will help to combat the 57% of the population who know nothing about the taxes they pay and instead help strengthen support for spending cuts.
Similarly, the Treasury hopes this calculator will help to create a more transparent system.
Yet this calculator does come with its limits…
You won’t be able to use it to calculate indirect taxes such as VAT, plus some are concerned that the public will misinterpret where some of these taxes are going, such as welfare. Whilst the majority will assume this sum is going into benefits for the unemployed, in truth most of this sum will go into the state pension.
How does the calculator work?
To use this tax calculator, all taxpayers will need to do is fill in their gross pay, and it will then calculate the amount of income tax they will pay over the year, their natural insurance contributions, total tax paid and where it goes.
Could calculators like these replace chartered accountants?
Admittedly calculators such as these may encourage more people to handle their own accounts and taxes, but such calculators can only do so much.
When it comes to VAT, inheritance tax, financing a business, buying property and dealing with your self assessment, the safest way to ensure that these are efficiently handled is to employ the help of a chartered accountant.
With their support: you can ensure you never miss a deadline; they can help you to manage and reduce your tax liabilities and more importantly, they can provide you with the business and tax planning advice you crave to take your business to more profitable levels.
So whether you have got an accountant or are looking to get one, remember calculators come with their limits…
Only with the support of a clever business accountant can you feel confident that all your bases have been covered.
With think-tank’s such as The TaxPayers Alliance urging George Osborne to prolong the coalitions spending cuts by an extra 5 years (to allow for tax reductions) as well as set a single rate of income tax at 30% (to stop taxpayers from getting repeatedly taxed), it does make you wonder if the current tax system needs updating.
According to their report they feel a single income tax could help to improve the economy, offer more job opportunities and stop families from being overtaxed.
And it is much easier to achieve than you think, once the following steps have been implemented:
- Cut taxes to 33% of national income (currently national income is taxed at 37.5%)
- Raise personal tax allowances to £10,000
- Make sure marginal tax rates do not go over 30%
- Remove taxes which are often disguised as business taxes i.e. taxes on capital and labour income, and replace them with a tax based on distributed income.
- Abolish transaction, wealth and inheritance tax.
- Consumption taxes should remain for the time being, but transport taxes need to be reduced.
- Local authorities should be allowed to raise 50% of their spending power from local taxes.
By implementing all of these, the TaxPayers Alliance feels this will help to remove pressure from families currently struggling to get by, and instead offer consumers are much simpler tax system to abide by.
Will it happen?
Whether it will happen, we don’t know. but what is clear from this report and similarly from the requests being asked of George Osborne is that something needs to be done to improve the economy in the UK.
With just a few improvements, the UK can get back on its feet again, prosper and become a hub of opportunity.
We all like to think that we are in the know about what forms need to be submitted when, especially when it comes to our taxes. Yet it is possible to get sidetracked and lose tracks of dates.
So if you would like to rely on more than your accountant to keep you abreast of important accounting dates, then here are some that we strongly suggest adding to your calendar.
- 31st – First self assessment payment due for previous accounting year
- Capital Gains tax payment for previous accounting year
- Last day to file Tax Return online for previous accounting year
- 1st – £100 penalty if previous years Tax Return has not yet been filed
- 31st – End of Corporation Tax financial year
Note: Chancellor will announce the Budget during this month which is usually around the 21st, but this is liable to change depending on what day of the week it falls on.
- 5th – End of Fiscal Year
- 6th – First day of Tax Year
- 30th – Annual adjustments for VAT partial exemption calculations
- 1st – Start of daily penalties for Tax Returns not yet filed for previous tax year
- 19th – Last day to submit your P14, P35, P38 and P38A for previous tax years PAYE returns
- 31st – Latest date to provide P60s to each of your employees for the previous tax year
- 6th – Filing deadline for Expenses & Benefits forms P11D (B), P9D and P11D to reach HMRC
- 31st – Tax Payable Second Instalment
- 30th - Submission of Personal Tax returns of directors, if any underpayment of tax is to be collected through PAYE
- 31st – Final day to submit 2012 Tax Returns on paper
Please note that these dates are only a sample of the numerous dates which may apply to you i.e. we haven’t included the submission of P46 forms for your car on this list. However what we have provided should give you a basic idea of all the important dates you need to be aware of.
Other than that, we strongly recommend speaking to an accountant who can clearly outline all the exact dates which will apply to your business. With their help you can ensure that you never miss a deadline.