Inland Revenue Sets Its Sights On eBay Traders

by Robert Lee, Tax-News.com, London

06 January 2005

As the UK government continues to toughen its stance on tax compliance, the Inland Revenue has set its sights on the internet auction site eBay, where thousands of Britons are currently making a tax-free income selling unwanted items.

Late last year, Inland Revenue officials met with representatives from eBay to discuss ways in which sellers using the website can be better informed of the tax implications of their activities.

This resulted in eBay agreeing to place links to the relevant pages on the Inland Revenue website. However, it is unlikely that the Revenue’s interest in the fantastically successful auction site will end there.

Most sellers, who use the site simply to offload unwanted gifts or other wares will not make enough money to attract the attention of the taxman. Nonetheless, there are growing numbers of people who are using the site to sell goods as their main source of income, and many have even given up their day jobs to trade full time on eBay.

It is this group of people that the tax authorities are increasingly worried is flouting the tax laws.

“With its anonymity, eBay may seem like an ideal opportunity to make a fast buck and dodge the taxman,” observed Ronnie Ludwig, a partner at accounting firm Saffrey Champness, according to the Times.

“However, if you buy goods with the intent to sell them (trading), then tax will be due on your profits. The Revenue will take an interest when goods are acquired as ‘stock’ and sold on for a profit,” Mr Ludwig added.

The Times reported that one trader selling designer goods through the website earns some £70,000 per year.

However, the anonymity of which Ludwig speaks is likely to make eBay a hard nut to crack for the Revenue, which may have to resort to scouring the records of all registered users.

eBay insists that individuals, and not the firm, are responsible for paying tax on their sales.

“Transactions between users are private,” the firm was quoted as stating by the Times.

“As with every business and individual, whether trading on or offline, eBay users are responsible for ensuring that they pay the appropriate taxes on their earnings,” it reiterated.

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