Ebay Tax and VAT question for the UK?

Question

Hello!
Would love some advice form traders please. From what started out as a hobby, I am now currently trading about £7000 a month on eBay, making about £800 after fees and stuff. The problem is I not think I should register for tax but Im a little naive, but a bigger issue is VAT. All items I buy are 2nd hand and therefore pay no VAT on at purchase, but if I go full time, and get VAT registered, do I have to pay 17.5% on all sales, therefore wiping out my profit margin?

Big thanks for any advice.

Cheers

So Im right in thinking, that if I buy an item from VAT registered source, say for £100 (pay £17.50 tax), sell for £150 (have to pay £26.25), the VAT it costs me is the difference (£8.75), but if I buy second hand then Im liable for the full £26.25?
Thanks!

Answer 1

I would certainly think about asking questions of your local VAT office, but I think most of what you trade will come under the second hand goods scheme. -

VAT is normally due on the full value of the goods you sell. The Margin Scheme allows you to calculate VAT on the difference (or margin) between your buying price and your selling price. If no profit is made (because the purchase price exceeds the selling price) then no VAT is payable.

The scheme is not compulsory. If you decide to use it you must meet the conditions of the scheme or VAT will be due on the full selling price of your sales.

Please see HM Revenue and Customs site for full details.

Answer 2

VAT registration limit is £61,000 per year (£5,000 per month) - if you have traded at this level for past three months (or think you will trade at this level in the near future) then you must register

Registration is based on the activity of an individual - so you can't split the trade amongst various companies to get under the limit.

However, if you and a partner were trading individually under different names (in distinct markets/goods), you could argue that there were two businesses, providing you included any trades/transfers between the two businesses (and that these transfers were not too large/frequent)

The amount you charge depends on the items - some are zero rate (eg childeren's clothes) or exempt so not everything will be taxable. Check the HMRC website to see if the stuff you trade is vatable (or check commercial web sites)

In principle, yes the selling price will have to yield a tax take of 17.5%. (actually it is 17.5/117.5 times the sale proceeds), unless you can use the second hand scheme mentioned above

BTW - if this is trade for a profit, then you should have declared your £800 a month for income tax

HMRC runs a 'fixed rate' scheme, whereby you pay a proportion of the VAT received as tax; this will help with the problem that you tend to buy from unregistered people who do not charge VAT

BTW - Commercial sites on eBay tend to advertise a price as being 'Plus VAT' - this could help you keep up sales prices and not see all your profit go pear shaped.

Answer 3

Yup, you are turning over enough to have to register for VAT. Don't fcuck with the VAT man; he has the heaviest boots in town. He has more powers than the police.

You need to see what you can do about input VAT (the VAT that people who sell to you should be charging). If you buy from VAT registered businesses, they should be charging VAT which you can claim back. They should be giving you VAT receipts. Perhaps that's where you should do your sourcing from now on?

The income tax question is one that depends on your status - limited company, sole trader, what?

Answer 4

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