eBay, Gumtree and other online marketplaces are great for getting that long sought item, or pulling in some cash from what you don’t need. So why is the tax-man sniffing around?
HMRC is being dragged kicking and screaming into the 21st Century and the tax inspectors have got to work with the mouse on their desk. Let the clicking begin
Someone who buys and sells the odd item of stuff they have for personal use has nothing to fear from what is happening here, but, I hear you ask, what am I waffling on about?
HMRC knows a lot of people are actually doing so much business online that they are actually trading, possibly even making money at it. They want anyone who is trading to admit to it and register their business. Those that don’t may find HMRC breathing down their neck
There’s an important deadline here. 14 June 2012. If you have been trading online for a while and want to clear things up in a simple way, that’s the date by which you or your tax adviser must take action.
This last few years HMRC has announced what I call amnesties. They don’t call them that – they call them Disclosure Facilities. They brought in a fortune from offshore income. Less successful were amnesties for dentists, plumbers and tutors. The purpose of these Disclosure Facilities is to give people a streamlined way to join the tax club, and a simpler way of declaring the income form past years than filling in 8 or 10 Tax Returns.
I love the name of this latest initiative. Trying to be cool and edgy, the HMRC boffins have come up with the e-Markets Disclosure Facility. What I love is how they abbreviate it. They call it e-MDF.
As a moderately keen DIYer, I just can’t get the alternative sort of MDF out of my mind.
Anyway, the carrot for people is that HMRC lets them register their online business by Thursday 14 June 2012. What’s the stick?
The stick is that HMRC has been gathering up, by various means, intelligence on who is trading online. Not only that but they are trying to obtain invaluable information from the big online marketplaces like eBay and Amazon – using formal powers they have to force companies to release information. Companies which refuse to hand over the details can face daily fines.
eBay’s public statement about HMRC’s information demands is “We do not hesitate to share information with government agencies should there be evidence of wrongdoing. We require all sellers trading as a business on eBay to register for a business account.”
In case you think they don’t know how to use online intelligence let me share a recent case with you. In a tax investigation HMRC recently referred us to an online posting back in 2004 as a way of showing that our client was trading, even back then. So these are not empty threats!
HMRC has also already written to thousands of people it already suspects may be trading online, and may not have registered the fact with HMRC. In 2011 and eBay trader was jailed for making profits and not declaring them over a 3 year period.
So let’s assume you are doing a lot of business online. Whether or not you are many much money, you should probably register by 14 June 2012. Here’s what’s involved:
- Notify HMRC by 14 June 2012 – online, by phone or post.
- Send the fuller details by 14 September 2012 – including paying the tax you owe (plus a penalty) for 6 years back.
The HMRC site has useful advice on how to consider whether your activity amounts to trading. Check that out at http://www.hmrc.gov.uk/campaigns/emarket.htm
Don’t miss the 14 June deadline. After that HMRC will have less sympathy, will charge higher penalties, and probably do more probing into your business.
All you have to do by 14 June 2012 is register. After that date you can then, if you wish, engage a tax adviser or accountant to help you fill in the special forms – for submission by 14 September 2012.
In the old days of bombs what we worried about was TICK, TICK, TICK.
Now those with a tax problem worry about the tax-man’s CLICK, CLICK, CLICK.
Adrian Huston, a former tax inspector, is a director of Belfast tax and accountancy firm Huston & Co – www.huston.co.uk or 028 9080 6080.