Sellers on the auction website Ebay are being warned to check if they need to register as self-employed with HM Revenue and Customs (HMRC) and pay tax.
Commercial traders are becoming a bigger feature of Ebay
Research suggests that about 68,000 people make all or a substantial part of their living selling things on Ebay.
However HMRC suspects that many can be defined as self-employed traders but are not paying their proper taxes.
It is warning them that they should pay income tax, national insurance and possibly value added tax (VAT) as well.
Conducting a business
Two hundred people registered in the first two days of the HMRC advertising campaign last week.
The publicity drive by HMRC does not represent a change in the law. It is merely highlighting the existing position.
"The overwhelming majority (of online sellers) are selling off unwanted goods. We are concerned with the minority conducting a business," said a spokesman.
The advice is not just targeted at Ebay users but people using any online auction forum such as Yahoo! Auctions.
It is also targeted at the growing number of buy-to-let landlords, some of whom may not be aware that they have to pay tax on their income from letting a property.
The HMRC's attention was drawn to these people by the tip-offs it received to its tax evasion hot line last year.
YOU ARE AN E-TRADER IF YOU
buy goods to then sell online
make items to sell for a profit
sell goods for others, on commission
sell a service and get paid for it
"There is a problem. These people stood out among tens of thousands of tip-offs," the spokesman said.
The HMRC is not just relying on the hot-line for evidence.
It is using a robotic computer software programmes, called Xenon, to scan internet sites like Ebay and look for people making multiple transactions.
"It is much more efficient than trying to do the same thing manually as we have in the past," said the spokesman .
HMRC says it will consider that people are trading online for a profit, and not just offloading unwanted goods, if:
- they buy goods to then sell online
- make items themselves to sell for a profit
- sell goods for others, on commission
- sell a service and get paid for it
If someone can answer yes to any of these points then they need to register as a business within three months of starting up.
They will be liable to pay income tax, national insurance contributions and also VAT if their turnover is greater than £61,000 a year.
The penalty for hiding tax that should have been paid is a fine of up to 100% of the unpaid tax plus payment of the tax itself and interest.
Ebay had about 15 million users in the UK as of February last year.
The company declined to say how many it thought might be fully fledged businesses, or individuals who might fall into HMRC's definition of a self-employed e-trader.
However the web site has become slanted more overtly to established commercial sellers in recent years, with large sections devoted to shops and other business sellers.
A spokesman pointed out though that "when you sign our user agreement you agree to pay any taxes applicable in your country."