Ebay and Taxes

THE taxman is clamping down on tax dodging ebay traders by hunting them down using a ‘web robot’.

The £250,000 robot, which was launched in March, is an advanced search engine that targets high-volume traders, such as those that sell goods on eBay, that fail to register for VAT.

HM Revenue & Customs (HMRC) expects the device to rake in an extra £1m+ a year in VAT and to force people to register these businesses

According to a report by the National Audit Office, the Revenue collected more than £1bn in VAT from e-commerce sales in the 2005-06 tax year.

This is expected to rocket by 2010 when the level of sales are expected to hit £60bn.

The number of people making a second income by trading on websites such like eBay has soared.

It is believed nearly 70,000 people earn a quarter of their living by trading on the website.

However, a large percentage of them don’t declare their earnings to the taxman.

Traders of second-hand goods only have to account for VAT on profits, but if they fail to register or keep records, then the taxman could charge them VAT on the full value of the goods.

Sir John Bourn, head of the NAO, said: ‘I find it encouraging that HMRC is well positioned to manage the current risks to VAT from electronic commerce.

‘With internet sales set to mushroom in the next few years, the department faces a challenge to ensure it stays ahead of the game.

Some businesses are inventive at side-stepping VAT, and the department will be equally innovative in guaranteeing the exchequer gets the revenue it is due.’

The Taxman is planning to clamp down on traders who make a living through auction websites such as eBay but fail to pay tax on their earnings.

HM Revenue and Customs is targeting consumers with a large number of ‘feedbacks’ to see how much money they make from the site.

Independent tax consultancy Chiltern said ebay traders often don’t register with the taxman, so there will be tax, interest and penalties to pay.’

If you make a profit by selling goods that you have bought you have to pay capital gains tax.

Everyone is allowed to make a certain level of profit each year, currently £8,500,before capital gains tax is charged.

You are also entitled to a ‘chattels exemption’.

This allows you to sell individual items or a set of itemsup to the value of £6,000 without any CGT being due.

However, if you are an active trader and derive a large part of your income from the site then you are not entitled to either the chattels or CGT exemption.

Watt added: ‘HMRC is said to be using the number of ‘feedbacks’ a user has to determine which individuals are ‘traders’ and are ripe for investigation.

Once these and other traders have been identified by HMRC there is likely to be a sudden surge of investigations.’

A spokesman for HMRC said: ‘If you are trading or making money and profit, whether it be from a workshop or through this online auction house, then you should consider registering for tax and VAT.’

(original article by money)

Theres one thing in life we can always count on ' Death and Taxes.'

pity it wasnt simply death to taxes..lol