PayPal to give seller details to taxman
August 7, 2008
The PayPal Blog notes that new legislation in the US will require PayPal to hand over sellers’ details to the IRS. US PayPal users who annually receive more than $20,000 in total, and more than 200 seperate payments, will have their details passed to the taxman. PayPal are keen to emphasise that the legislation does not come into effect until 2011, so the first details will not be handed over until 2012.
Last year, eBay Canada was compelled to hand over records relating to Canadian PowerSellers to the Canada Revenue Agency, and eBay Australia gave information on their top sellers to the Australian Taxation Office. With the UK taxman already spidering auctions, it can only be a matter of time before HMRC ask for British sellers’ records, so the advice remains contact them before they contact you.
HMRC self assessment website down
January 31, 2008
On the last day for submitting and paying tax returns for the 2006-2007 financial year the HMRC self assessment website has crashed! It simply displays a message “The Self Assessment on line system is temporarily unavailable to some customers. We apologise for any inconvenience caused and are working to restore the service as soon as possible”
If you’ve not submitted your tax return online but were planning to do so today it may be worth contacting HMRC direct, although I suspect their phone lines are exceptionally busy.
HMRC have not indicated if there will be an extension for submitting tax returns or if late submission fines will be waived.
(Many thanks to John from ChannelAdvisor for the info)
Court orders eBay to divulge sellers earnings
September 27, 2007
A court order has been given for high volume Canadian eBay sellers sales information to be released to the tax authorities. This includes names, addresses, phone numbers and e-mail addresses of all sellers who qualified as PowerSellers in 2004 and 2005.
The Canada Revenue Agency (equivalent to HMRC in the UK) wants to cross reference the data with that filed on sellers tax returns and verify the income sellers have reported.
Whilst eBay have argued in court that they don’t have the information required as it is held on eBay servers located outside Canada the courts have ruled they are legally obliged to hand over the data.
It will be interesting to see if the US and UK tax authorities follow suit and demand eBay divulge sellers information. So far eBay have defended assisting the US IRS and in the UK only hand over individual sellers records when named records are specifically requested.
Sellers who declare legitimate earnings have nothing to fear, but those that are not paying any taxes due should contact the Inland Revenue before the Revenue contact them.
Luxembourg votes to keep eBay tax low
June 7, 2007
eBay and PayPal have both recently moved their European head offices to Luxembourg. For PayPal the main advantage was a banking licence which allows it to offer services more attractive to mainstream businesses. For eBay undoubtedly it’s because the Duchy has a low VAT rate which is applicable to all fees charged to eBay users.
It’s not just eBay, Amazon, AOL and Skype have all relocated to Luxembourg to take advantage of their VAT rate to sell services to the rest of Europe. Up until now it’s seemed like a smart move until Germany removed it’s objections to reforms to Europe’s VAT regulations. If the reforms went ahead it would end low VAT rates and companies selling services over the Internet, regardless of where they were based, would charge VAT in the country in which the user was located. That would mean eBay users in the UK would be once again charged 17.5% VAT instead of the current 15%
eBay have just been thrown a life line though, European rules insist on unanimity on tax regulations and one country voted against the reforms effectively vetoing them for the foreseeable future. No real surprise that that country was Luxembourg who would have lost one percent of their GDP had VAT regimes changed.
What does it mean for eBayers? Well for non-VAT registered sellers there is no change, you still pay the same total fees regardless of the VAT rates. For VAT registered sellers in the UK the difference would have been a 1.85% net change in costs in their favour.
The budget effect on eBayers
March 21, 2007
Gordon Brown presented his final budget as Chancellor before he’s expected to move into No.10 Downing Street as Prime Minister. We thought we’d take a look at how it might affect an average eBayer:
An important change to note is for people who complete self assessment Income Tax returns. You can still file your tax return online up until the 31st January, but if you send in a hard copy return it needs to be received by HMRC by the 31st October. This applies from 2008, for tax returns from 2006-2007 the January 31st 2008 date will still be the deadline for both paper and electronic tax returns. If you want HMRC to calculate your tax liability the date will move back a month to 31st October to match the deadline for paper returns.
One significant area of the budget aims to reduce the advantage of small limited companies compared to self employed sole traders. “The budget will raise the small companies’ rate in three stages from 20p this year to 22p in 2009″. This continues to reduce the advantages of an eBay trader as a limited company. With more accounting and reporting responsibilities as a limited company, being a sole trader looks more and more attractive.
If your turnover is approaching the VAT threshold there is a small increase from £61k to £64k before registration is compulsory. In reality if you’re that close the threshold a difference of £250 per month turnover isn’t going to give much room for manoeuvre. To combat carousel fraud more electronic goods are added to the joint and several liability list. Basically this means if VAT is reclaimed elsewhere in the supply chain all companies that handled the goods are liable outstanding VAT.
Many eBayers need to run larger vehicles to collect and delivery stock, it’s just not practical to do so in a small car. They’ll find an increase in car tax in the next year from £210 to £400 over the next two years. This will however only apply to the largest cars and 4×4’s purchased since April of last year. Fuel duty also rises 2p a litre from October with further rises in 2008 of 2p, and again in 2009 a further 1.8p.
From 2009 higher rate tax will be payable on income over £43,000 pa. The 10% income tax band will be abolished and the basic tax rate cut from 22p to 20p but this won’t come into effect until April 2008. Sounds great, until you realise you’ll have to wait a year to benefit. It will also benefit high earners more than low earners! Low earners will effectively pay 20% of the first £2,230 earned (after personal allowances) instead of 10%. Perversely this won’t actually affect many people as if they have children working tax credit or child tax credits will kick in. The losers will be those without children who are part time workers, school leavers on low wages, and low earners. Of course this will often include eBayers just starting their businesses until they build up their income.
Finally anyone travelling from the UK to eBay Live will be pleased to know the chancellor rejected calls to add VAT at 17.5% to plane tickets on the basis that businesses would simply reclaim VAT anyway!
The Telegraph has another tax reminder
March 20, 2007
In case you needed yet another reminder, this morning’s Telegraph has a feature on how the taxman is after eBay profits. As they say, “For anyone not complying, the best advice is to get up to date now and we will do everything we can to help to make the process as simple as possible.”
The HMRC website now has an easy guide to help you work out if you should be registered as self-employed, so there really is no excuse whatsoever to put it off any longer.
eBay Oz gives sales records to the taxman
March 13, 2007
We all knew this was coming: eBay Australia has given details of its top sellers to the Australian Taxation Office. The ATO have targetted sellers with turnover of more than AU$50,000, who should be registered for GST (sales tax): up to 1000 sellers are thought to be involved. The information handed over includes details of sales from 2003 to 2006. One of the sellers who is already registered for GST said she welcomed the move: “I have always been straight with my figures and if it is going to stop the ratbags out there who aren’t registered for GST, it’s a good thing.”
If you’ve forgotten to tell your own tax office about your eBay income, don’t think that this is going to be limited to Australia. British, European and American revenue officials all have their eyes on eBay, and it’s only a matter of time before you get caught. So contact them before they contact you.
In the meantime, sellers caught out might find some cold comfort in the fact that eBay themselves are registered as a foreign company in Australia, and are therefore not collecting any GST on their fees. We expect the ATO to change this very shortly.
Via Auctionbytes.
Tax authorities want eBay to hand over your sales data
February 20, 2007
Business sellers who are not registered to pay tax on their profits won’t rest easy tonight. The the US equivalent of HM Revenue & Customs, the IRS is pressing eBay to hand over records of sellers activity with particular focus on those performing over 100 transactions or $5000 per year. The IRS estimate they could collect some $2bn in unpaid tax if companies such as eBay complied.
Sellers should be contacting their tax office before the tax man comes knocking on their door. In the UK HMRC has started a high profile campaign to get sellers to register to pay tax and now it’s the turn of the US.
eBay maintains the position that it always has in the past, it is not their responsibility to notify tax authorities of sellers trading activities. In fact it can be argued if they should then so should many other trading venues such as classified advertisements both on and off line.
To provide the data certainly wouldn’t be too difficult, but it would certainly deter the casual seller who simply wanted to dispose of a large amount of possessions, for instance in the case of a house move, or death of a relative. Whilst it is unusual for private sellers to dispose of a large number of items it’s by no means unheard of, just browse the eBay community boards for sellers who to their surprise are suddenly elevated to the status of powerseller because they sold their car on eBay.
Tax authorities in several major eBay territories have been actively monitoring eBay with the Xenon Spider which catalogues all auctions. Although Xenon hasn’t been reported to be used in the US it is known to be live in both the UK and the US neighbour Canada. With some $52bn GMV in 2006 financial year, $25bn of which was in the US, it’s no wonder the IRS is interested in keeping tabs on which sellers are making how much profit.
It should be noted that eBay have *always* fully cooperated with tax authorities when information is requested on a specific individuals activity on the site. It is the handing over carte blanche rights to their entire customer data that they object to. Sellers should not take any sense of security in eBay resisting attempts to open their books. If you’re not paying the taxes that are due on your sales once you come to the tax authorities attention they only have to ask and data on your trading activity will be handed over.
“Don’t panic. Contact us. We will help with your tax”
February 13, 2007
That’s what Patrick O’Brien of HM Revenue & Customs told me this morning when I asked what advice he would give eBayers that haven’t registered to pay tax as an Internet Trader. He emphasised that the tax office are not interested in people selling off unwanted Christmas presents but are encouraging traders to register to pay Income Tax, National Insurance and VAT if applicable.
The key point is to register, because if you don’t you will get caught! Not only do they have the new Xenon spider checking your auctions but they have countless other means of tracking you down. However they will look kindly on you coming forward and registering. If you contact them before they come calling for you it will be important in mitigating any tax and penalties due. There will be far more punitive penalties for those that do not register but get caught at a later date.
Patrick went to great pains to point out that even if you failed to register when you started trading (buying to sell), they will do everything they can to assist you with the process, help complete your tax return, and of course work out what tax and penalities you owe. By you contacting them they’ll do their best to assist you and make the process as painless and friendly as possible.
A word of warning for those still wondering whether to register or not, Patrick pointed out that if they catch you not only will they pursue you for the full tax and all penalties owed, but they will also levy a fine equal to 100% of the tax owed. You’ll end up paying twice!
Finally Patrick told me “There is nothing to be afraid of”, registering with HMRC and putting your affairs in order isn’t that hard, and he really is a friendly, easy to speak to person. We know there are a lot of you out there reading this article, we’ve seen the amount of traffic to TameBay on our other articles talking about tax. If you are wondering if you should be paying tax, phone HMRC on 0845 915 4515 right now and they’ll be friendly to you too 
The tax man is on his way
February 6, 2007
Following on from the Xenon revelation that HMRC is tracking all eBay auctions and cataloguing them for future investigations HMRC launch a new guide for people that trade online. The aim of the guide is to help you decide if you need to register to pay tax - either Income Tax, VAT or Capital Gains Tax.
As well as the guide which is already live on the HMRC website advertising links will appear on websites countrywide to publicise the site. Although the guide is aimed at all those who may have an income from being self employed or as landlords the guide specifically asks if you are an e-trader and if you are selling on sites like eBay.
The guide also points out that money earned through affiliates schemes such as eBay and Commission Junction or Amazon Associates is taxable.
HMRC’s Director of Risk & Intelligence, Stuart Hartlib said: “In the new guidance, there are examples to help you work out if you have to pay tax when you sell items online. This site is designed to make registering and paying tax easier, so you can work out whether you are self-employed and need to file a return.”
eBay move costs Treasury £25m
February 4, 2007
The Telegraph reports eBay’s move to Luxembourg will cost the UK Treasury £25m a year in lost VAT revenue.
While the cost to the public purse is relatively small in terms of overall tax revenue, eBay’s decision will embarrass Gordon Brown, the Chancellor, because it suggests that Britain is not the most business-friendly country in Europe.
With 15% VAT, the lowest rate in Europe, and multilingual resources readily available, Luxembourg’s attractions seem pretty obvious. The paper reports that the overall effect of eBay’s move will be the equivalent of a £200 bonus for every one of the country’s tiny 465,000 population.
I spider tax man coming
January 31, 2007
Today is the last chance for many eBayers in the UK to submit their self assessment tax return if they haven’t already done so. Not only that but by close of business today millions of people up and down the country will suddenly have lighter bank accounts as they settle any balancing payments from the 2005-2006 tax year and make the first payment for the 2006-2007 tax year. It’s an expensive time of year but for those that have adequate financial planning an accepted fact of being self employed.
What of those happily selling on eBay that have “forgotten” about the tax man? Well I guess they’ll be oblivious to the filling in and completing a tax return but will they get caught or are they home and dry laughing all the way to the bank?
A little known computer program called Xenon has been loose on the web for the last two years. Xenon is a spider which crawls website a little like Googlebot which trawls websites cataloguing everything in it’s path. While Google crawls the entire web Xenon is more specific restricting itself to Internet auction sites such as eBay. Slowly but surely it visits each individual auction and saves them along with links to all other auctions from the seller. Then it’s Identity Information Extraction Module correlates any information such as names, postcodes, cities, streets against national databases to identify mailing addresses and users real identities which can be matched with tax records.
Xenon originated in The Netherlands and now operates in four other countries as well - Austria, Denmark, Canada and of course in The United Kingdom. Next time you’re wondering if your competitors on eBay are undercutting you because they’re not paying tax relax with the thought that big brother really is watching. Time is running out for those cheating the system.
eBay VAT status changes in the EU
January 29, 2007
eBay are to change their VAT status in Europe with the establishment of a new company located in Luxembourg, called eBay Europe, S.Ã r.l. From March 1st all European eBayers will have their contracts moved from eBay International AG in Bern, Switzerland to eBay Europe, S.Ã r.l.
This change won’t affect most eBayers - the total fees charged will remain the same (Although eBay have just REDUCED fees, again effective March 1st).
The main difference will be to VAT registered business sellers who have applied to pay eBay fees net of VAT. In this case previously sellers were charged fees net of VAT, effectively in the UK with 17.5% VAT a 14.89% discount. This will change to 15% VAT (the rate effective in Luxembourg) effectively a 13.04% discount. The net change for the UK is a loss of 1.85%
Other European countries will be affected somewhat differently - for instance France with 19.6% TVA will have a greater change with a net loss of 3.35%.
It is important to remember that gross eBay fees as per the published tariff will not change, the only sellers affected will be business sellers who have registered their VAT number with eBay for VAT exemption. Although increases in costs are never welcome we would expect most sellers will probably cease to notice the change after a month or so.
Finally if you have been claiming VAT back yourself from the tax authorities from 1 March 2007 this will no longer be possible. The only way to pay eBay selling fees net of VAT will be by registering your VAT number with eBay.
Tax offices may strike on January 31st
January 2, 2007
UK taxpayers may want to plan to get their tax returns posted a little early this year, as the largest civil service union plans strike action for deadline day. The industrial action, which could also affect many other services from driving tests to passport applications, is over compulsory job losses, below-inflation pay offers and outsourcing.
The tax man just bought me a new car
December 22, 2006
It’s not often I find something new to do on eBay, but I did this week. For the first time I purchased a motor from eBay.
As mentioned in our post Accounting for your accountant purchasing a commercial vehicle would be advantageous from a tax perspective. At the busiest time of year in sales there was no time for running around garages to choose a motor so eBay motors was an obvious choice. However the purchase was not made directly through eBay.
eBay recently introduced a new listing format specifically for eBay motors called Classified Ad Format. Classified Ad Format allows sellers to list vehicles for a 28 day period at a fixed price, but the sale is completed off eBay in the same way as if you were buying from a traditional newspaper advert. The big advantage is that it’s possible to search the whole country to find your ideal vehicle and that’s exactly what I did!
Crewe is the place I found it, and yesterday saw me spending three hours on the train (passing the time reading Ben Elton’s latest novel). The dealer collected me from the train station and after swiping my debit card (I’m sure that’s not the best way to pay for a car!) I was on my way back south.
You might think travelling a couple of hundred miles to buy a car you’ve never seen is a bit of a risk, and normally it would be. However eBay does give you a lot of peace of mind. Firstly the motor I chose was offered for sale by a professional vehicle dealer displaying the Car Dealer Icon shown on the right. Also with Classified Ad Format the only way of completing the deal is to talk directly to the seller enabling you to ask for additional information to satisfy you regarding the transaction. It’s not like bidding on an auction.
So the perfect motor for business use, plenty of space for stock or the odd delivery, still comfortable enough for long distance trips, and importantly seating for four! Best of all because this one was bought for business use the cost can be written off against tax
All in all a great buying experience, if you’re looking for either a car for personal use or a commercial motor, eBay motors is a great place to buy from.
Recent Comments
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