How will your ebay selling be taxed?

Unless what you're selling is an investment asset, you'll need to determine if you are undertaking a trade. Essentially this is a determined by looking at what your intention is. Almost any asset or activity can be the subject of trading and the main question the taxman will look at is whether you had a profit seeking motive when you purchased it. As it's pretty difficult to read someones mind the Revenue look at a number of indicators (known as the 'badges of trade') to help decide whether someone is trading or not. Some of the main indicators will include:

• Isolated or repeat transactions. If the transactions were repeated regularly this would indicate a trade
• The nature of the asset. Some assets are less likely to be trading than others in particular this includes:
• Income producing assets such as shares
• Assets acquired for personal enjoyment such as paintings or classic cars
• Quantity purchased. Larger quantities can indicate a trade
• Connections with existing trade. Is there an existing trade. For example a DVD shop owner selling DVD's in his own name via ebay would be more likely to be classed as a trader than someone selling a few old DVD's
• Any modifying of the product necessary before selling would indicate a trade
• Organisation of the activity. If you have the same kind of operation as a recognised trader his will indicate trading
• A Company formed for the purpose of the transaction will indicate trading
• The reasons for sale will be important to assess what the original motive was. If there was a good explanation, such as a sudden emergency calling for the money, this could bring doubt on the idea that the original purchase was for a trading purpose
• Interval of time between purchase and sale. The shorter the period the more likely it will be classed as trading.

Although there will always be cases on the borderline it's pretty clear where the distinction will lie. If you are buying goods for the purpose of resale on E-bay you'll fall squarely within the trading provisions. As such you'll need to pay income tax as well as national insurance on any profits you realise (this is covered below). Note that if you are UK resident and UK domiciled this applies wherever in the world you are selling your goods. So even if you are selling goods to the US, any profit would still be taxed in the UK. If you are non UK resident, you will only be taxed on UK trading profits. In this case just because you sell goods on a UK auction website would not open you up to a UK tax charge. The chances are you'd escape UK tax completely unless you had other offices or a permanent establishment in the UK. By contrast, if like many you are selling goods that you already own, such as unwanted gifts, old clothes/DVD's/Books or inherited goods you shouldn't be classed as a trader, and there would usually in this case be no tax (and certainly no national insurance) to pay on any profit that you realise. The only time that you could then be caught within the UK tax net is if you dispose of an asset that is subject to capital gains tax.