Recent headlines that HMRC will be targeting those who sell online via platforms such as Depop and Vinted has caused quite a stir.
No new legislation has been introduced. It has always been the case that those who are deemed to be trading will be subject to income tax and national insurance on any profits that are made. There are several badges of trade that HMRC will look at to determine if someone is trading however the main indicator is selling with the view to making a profit.
Where profits exceed £1,000 in any tax year, you are required to register as self-employed and report your income and expenditure to HMRC through a self-assessment tax return. These profits will be subject to income tax and Class 2 and 4 national insurance.
For those who are using these platforms to get rid of unwanted items, there will be many who are selling these items for less than originally paid. In this case, no profits are being generated and therefore there is no need to declare this income to HMRC.
Whilst there is no change to the underlying tax rules, HMRC will now have more visibility on transactions to determine whether tax liabilities should arise. From 1st January 2024, digital platforms are required to collect and report seller information and income to HMRC by way of an annual report.
If you regularly sell items via an online platform and are making a profit you should carefully consider whether HMRC would view you as trading.
If you require any advice in relation to your reporting obligations please do not hesitate to contact us at hello@drummondlaurie.co.uk.
