HMRC are well known for checking sites like this to see who’s selling, they have also been known to turn up at craft fayres and car boot sales to see who’s selling.
Once you start selling other than selling off your unwanted items you are classed as a business.
Also beware people will turn you in to HMRC as well.
Best always to be legal and just because you earning might be under your personal tax allowance doesn’t mean you don’t have to register and complete your tax form every year. This has to be done even if you are trading at a loss.
You have 3months from setting up to register and if you fail to do this and once you get caught there’s a nice fat fine to pay.
Anyone who is selling to the public with the intention of making a profit (whether or not you actually do) is running a business for tax purposes and needs to register as self-employed. As Eileen says, there are penalties if you’re not registered and are caught trading. There’s no minimum amount of profit required, it applies to everyone regardless of actual profits/losses made.
This has not been my experience. I contacted HMRC by letter when I first set up my shop as I wanted to make sure I was doing the right thing. They wrote back and told me that ‘I did not meet the rules for completing the self assessment return and it would only be required if I were to exceed my personal allowance for the year’. Those were the exact words on the letter.
I keep accurate records but am no where near the personal allowance, even with my part time job.
Kim
That’s interesting Kim @KBCreations, and it shows that everyone’s situation is different, but it’s ultimately down to HMRC to make that decision after you contact them to register, which you did. Many people do this as a second job and are already earning over the threshold with their main employment, so would definitely have to complete the annual return. I would always advise sellers to check with HMRC (as you did) before assuming they don’t need to bother…and to get it in writing!
Yes get it in writting because even then you can get into trouble. As this happened to someone I knew who was well under her personal allowance and she got it in writting she didn’t need to. Then later she got a nasty HMRC letter. Even with her previous letter she still ended up paying the fine and stopped selling. She had a shop on ebay.
HMRC gave me similar advice when I first started up, as back then I gave all my profit to charity in my sisters memory. The person I spoke to initially said I didn’t need to fill out a Self-Assessment form. When someone else on another crafts forum I belonged to at the time pointed out that this was incorrect, I phoned HMRC thinking they’d just reiterate what they’d told me before. They then said I’d received incorrect advice previously from them and I did indeed have to register and complete the SA form each year. I was pretty peeved with them to put it mildly!
That’s why I got it in writing. I shall write to them every year with my outgoings and incomings and see if get the same answer. So far I have. I never rely on what I’m told by phone.
I think it’s always easier to register, it doesn’t take long and if you aren’t making above the threshold then you simply won’t pay tax. For the amount of time it all takes I think it’s less hassle than the chance of receiving a fine.
