New tax guide for online trading

As more and more people buy and sell items over the internet, the distinctions between occasional sellers and online traders have been blurred.

It is in response to this dilemma that HMRC has launched a new online guide, pointing out the key distinctions for those unsure of the tax repercussions.

Found at the HMRC website, the new guide lists criteria for self-employed status, and points out that those who qualify may need to fill in a self-assessment return and pay income tax and national insurance contributions.

Individuals may have to consider themselves self-employed if they sell goods that have been bought with the express intention of re-selling them. Making items and selling them with the intention of making a profit is also a major consideration.

HMRC is also interested in those who sell or buy goods on behalf of other people for financial gain, on the basis of commission. Providing a service and receiving payment in cash or kind will also interest the taxman.

Anyone considered self-employed on the basis of these points may also have to register for VAT, and it is important that new e-traders inform HMRC of their activities within three months of setting up in business.

"This site is designed to make registering and paying tax easier, so you can work out whether you are self-employed and need to file a return," said Stuart Hartlib from HMRC.

Those who are not trading for profit but choose to sell a few unwanted items to clear space will not have to pay income tax or national insurance, HMRC has revealed.

It is largely because of eBay and similar trading websites that this issue has been brought to HMRC's attention. It is thought that eBay alone has a global customer base of 181 million, making it a firm favourite with businesses around the world.