Business News
Online traders next on the HMRC’s hit list
Notably only if they have tax outstanding, but never before has the tax man loomed so heavily over online traders’ doors, along with private tutors and those that may be trading behind closed doors and not declaring their earnings.
HMRC have rolled out plans and targets to outline who and what would come under scrutiny, and the main players will be those dealing with large amounts of trade as opposed to the small time online buyers and sellers, so you can breathe easy on your ‘every now and again’ eBay account. It has also been noted that of the online traders, only a small amount will come under fire for the amount they are trading and not paying tax for, but that tax left unpaid could leave a sizeable dent in the tax wallet.
Software has been developed to trawl the web for the main culprits and data will go straight through to the HMRC to move forward with any penalties in a bid to recoup £7bn a year by 2015. HMRC will be looking at those defaulting on VAT yet earning more than £73,000 turnover and haven’t registered, as shown in previous campaigns against plumbers, doctors and dentists.
The campaign has been welcomed by the Chartered Institute of Taxation (CIOT) but they have voiced concerns over the HMRC’s reports that implicated traders working under the tax threshold of deliberately evading paying tax, often doing so legitimately.
The CIOT commented, “Clearly those who are evading tax need to be tackled, but some businesses deliberately keep below the threshold to legitimately avoid being VAT registered, as it can significantly increase their real selling prices and reduce profits where a business sells to individuals and can be very bureaucratic,”
Such was the success of the Plumber Tax Safe Plan campaign that there is talk of extending the program out to other skilled trades people such as electricians and carpenters, and with an open mind, the department will be looking to target more white collar professionals on its next campaign. A spokesman from HMRC has noted that these could even be accountants and lawyers – any allowance where undisclosed income could slip under the radar.
Advice to online traders
The “badges of trade” are known as the defining attributes of the specific criteria surrounding regular trade, including regularity, buying and selling for profit, quantity of goods or services sold and profit motive.
Registering with HMRC is compulsory but does not mean you will pay tax or NIC automatically. The tax year ends April 5th and is a good time to coincide working out your annual profits and subsequently make your payments.
· Keep a separate bank account for business, keeping business and personal sales separate.
· Keep a note of all the costs directly related to the business.
· Keep a record of costs that relate partly to the business, for example the use of home and car with the ratios of business and personal use, by doing this the business use proportion can be claimed as a tax expense.
