What is it?
Other items such as food and batteries fall into a grey area for eBay, which describes them as “questionable”. So if you have 1,500 cream cakes to sell, check with the site first before you try to auction them off.
eBay promises tough action against those breaking the rules, and you could find yourself barred if you persistently flout the code of conduct. Not delivering items on time or not paying for goods is frowned upon – not only can this get you in trouble with eBay, it will impact on your image as a reputable business.
Because you are a reputable business, there are also rules from HM Revenue and Customs (HMRC) to follow.
If you’re trading as a business, you have three months to register as a sole trader with HMRC; this can be done at your local office, or online. If you expect your turnover to exceed the threshold for VAT (currently £73,000 ) you must notify HMRC within 30 days. You will then need to electronically submit a VAT return each quarter (monthly and annually options are also available), and it’s probably prudent to engage the services of an accountant.
Most eBay traders don’t have to register with Companies House. However, if you decide to trade through a limited company (which can be more tax efficient) then things are slightly different, and Companies House registration becomes a formal requirement. Each year a set of accounts needs to be submitted to Companies House as well as to HMRC, together with a CT600 company tax return.
Any profit from the business will be treated as personal income, meaning you have to complete a self-assessment tax return. If your turnover is below £15,000, you only need to complete three lines on the self-assessment form: your total income, your total allowable expenses, and your profit. However accountants would strongly recommend you take a more thorough approach, and cover as much of the self-assessment as you can, even if you don’t technically have to.
In June 2011, HMRC announced a major clampdown on tax from eBay earnings, so it’s more important than ever to be vigilligant and methodical in managing your tax affairs. Thankfully, a number of accountants, such as Nick Robinson at Yorkshire Accountancy, can offer specialist advice for eBay sellers.