Vinted, eBay and Etsy sellers are at risk of going under criminal investigation, warns an accountancy expert.
This follows news that HMRC is investing £40m in additional resources to find tax avoiders.
As more UK residents look to the likes of Etsy and Vinted to make some extra cash this Christmas, tax professionals are raising the alarm.
Lee Murphy, Managing Director of The Accountancy Partnership, an accountancy firm that specialises in tax returns for Amazon and eBay, says: “HMRC uses the platform, whether this is Etsy, Vinted or even eBay, to match against each individual’s tax return.
"Those who’ve exceeded an annual trading allowance of £1,000 and also fail to declare this may receive reminder letters to ensure that they get their tax return done.
"While you may think this is just a scare tactic, ignoring these types of letters may lead to further full tax inquiries and criminal investigations.”
He says HMRC now has increased access to online selling activity, and non-compliance could lead to in-depth investigations or large fines.
From the beginning of this year, HMRC started receiving data on sales and users for anyone who has more than 30 transactions per year, regardless of profit.
On Vinted, particularly, reporting thresholds were tightened, and users who either do 30 sales per year or exceed £1,700 of gross sales over 365 days must now have their data reported with HMRC.
To work out how much tax you should be paying for selling items online, you can check using this tax calculator here: https://www.theaccountancy.co.uk/calculators/limited-company-vs-sole-trader-calculator
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“If you are selling unwanted personal items and not making repeat trades or dropshipping, then you’re unlikely to face HMRC scrutiny," clarifies Lee.
"If you do, however, earn over £1,000 from your side hustle each year, or you exceed 30 sales within one year, then you must let HMRC know about this to avoid getting any fines or being under any sort of criminal investigation.
"If you’re unsure of how many items you’ve sold or how much money you’ve made so far, then it’s best to go back and find your detailed sale records. Also keep track of any expenses that’ve gone with the sales; stamps, postage materials and courier payments, as you could get some of this back when the time comes to doing your self-assessment tax form.”
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