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Taxman looks at eBay users' profits

Negative points for e-traders

An increasing number of people earn their living or supplement their earnings by selling goods on online auction sites such as eBay, and resale affiliates such as Amazon.

The Inland Revenue wants to tax such people if dealing is great enough to warrant being called a business.

If you sell the odd, unwanted gift or some personal possessions, you might not qualify as a trader.

HM Revenue & Customs has the fllowing advice for e-traders:

"If you buy items with the intention of selling them on as quickly and as profitably as you can, then you are a trader and likely to be self-employed.

"You may have to pay Income Tax and National Insurance contributions and we will treat you as a self-employed person for that trade. If so, you need to fill in a self-employment form. Register online now as self-employed.

"You may also need to register for VAT. Traders of second-hand goods only pay VAT on the margin they make: in other words, they are required to pay VAT on the difference between the price they bought the goods for and the price they sold them for.

"But if you fail to register for VAT or keep records to show what you are buying and selling, you could be charged VAT on the full value of the goods you sell.

"If you believe you are trading and therefore self-employed, you must register to let us know within three months of starting your business, or you could pay a penalty."

The same goes for people who make fictional profits on virtual games such as Second Life. Read more here.

HM Revenue & Customs is running a kind of amnesty for people who haven't yet paid all taxes owing from self-employment, off-shore accounts, internet trading and buy-to-let rentals.

Declare your profits now and you should avoid paying up to 100% penalties on top of the monies owed. 10% penalties will still be payable for profits over £2,500.

The amnesty runs out on June 22.

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