Following the recent tax shame of major online traders such as Amazon, eBay and Google, HM Revenue & Customs (HMRC) is stepping up its investigations into individuals that earn a significant profit through the sale of products and services over the internet. The campaign will target all types of trade and businesses that sell goods or services for profit online.
The e-marketplace campaign was initially introduced in February 2012 and targeted online traders in the tax year 2012/2013 which helped the tax authorities to discover the likes of Amazon has avoided Corporation Tax to the tune of £7.6 billion of profit over the last three years.
Now the tax authorities has made an example out of the top guns, investigators are setting their sights on small businesses and are trawling the net targeting private tutors, electricians, doctors, dentists and plumbers. The tax man is also focusing on people who regularly use eBay as a platform to sell products. However, selling the occasional personal item will not be considered as commercial trading and is therefore not taxable.
HMRC will only consider businesses for Corporation Tax if you are deemed to be active in any of the following situations:
- carrying on a business activity such as a trade or professional activity
- buying and selling goods with a view to making a profit or surplus
- providing services
- earning interest
- managing investments
- receiving any other income
HMRC online trading penalties
Businesses that make a significant profit through online trading activities for the sale of products or services are responsible for notifying HMRC by filing a Self Assessment tax Return form by October 31st – if you submit the form on paper, or 31st January 2014, if you file your return using the online form on the HMRC website. Failure to meet the final January deadline will incur a penalty £100.
However, it could be worse! If the taxman discovers you have made a profit from online trading without notifying them, you will be ordered to pay fines 40 up to 100 per cent and if necessary summonsed to court. In the most extreme of cases criminal charges will be brought against you which could result in imprisonment for fraud.
How much can you earn online
At the time of writing HMRC has not put a cap on how much profit online traders can earn for the tax year 2013/14 although it will probably fall in line with the thresholds for personal allowance for people born of 1948 which is currently £9,440. If your turnover from online trading within the UK is over £79,000 you will also need to register for VAT.
The regulations surrounding taxable earnings for online trading and the thresholds for non-taxable incomes are complicated so if you are trading online for a profit using platforms such as eBay and Amazon we recommend you look for professional advice by contacting one of our friendly professionals on firstname.lastname@example.org or on our free phone number 0800-0235-234.