Firstly, if you are an online trader and its not just a hobby, makesure you register and pay tax.
The criteria used to assess if an activity is a hobby or a business are:
- The size and commerciality of the activity.
- The frequency of the activity and transactions
- The application of business principles.
- Whether there is a genuine profit motive.
- The amount of time devoted to the activities.
- The existence of arm’s-length customers (as opposed to just selling your wares to family and friends).
You must register for VAT with HM Revenue and Customs (HMRC) if your business’ VAT taxable turnover is more than £83,000.
So once you are VAT registered and trading online with Ebay, Amazon or other platforms how do you work out how much VAT you should account for on sales?
Let’s take an example:
Sales are £5,000
Online Platform Commission £500
Is your VAT able income:
a) £5,000 (Goods)
b) £5,500 (Goods plus Postage)
c) £4,500 (Goods net of Commission)
The answer is b) Goods plus Postage = Total Sales Value
Assuming its a UK customer and goods are standard rated the VAT would be £5,500/6 = £916.67 because when you sell to consumers the price is inclusive of VAT.
If your platform provider is based outside the UK but in the EU their fees will subject to ‘Reverse Charge‘ VAT.
When you buy services from suppliers in other countries, you may have to account for the VAT yourself – depending on the circumstances. This is called the ‘reverse charge’, and is also known as ‘tax shift’. Where it applies, you act as if you are both the supplier and the customer – you charge yourself the VAT and then, assuming that the service relates to VAT taxable supplies that you make, you also claim it back. So there’s no net cost to you – the two taxes cancel each other out. [HMRC]
Tax-Free Childcare will be available to around 2 million households to help with the cost of childcare, enabling more parents to go out to work, if they want to, to provide greater security for their families.
- The new scheme will start in early 2017
- You will open an online GOV.UK. Tax-Free Childcare account
- For every 80p paid in there will be a top up of 20p. The government will top up the account with 20% of childcare costs up to a total of £10,000 – the equivalent of up to £2,000 support per child per year (or £4,000 for disabled children). You or anyone can pay in whenever and whatever amounts you choose.
- Its available for children under the age of 12 or 17 if disabled
- Parents must be working and earning between £100/week and £100,000/year, there will be a 3 month checking process.
- Any working family can use Tax-Free Childcare, provided they meet the eligibility requirements. Its not dependent on your employer offering a scheme. Its also available to self employed parents and those of paid sick leave, SMP, SPP and Adoption leave.
- You will also have the option to continue with an employer supported scheme
- If you need to you can withdraw the 80p part paid in
You find more details at Gov.UK
Just in case you haven’t been watching the BBC News….
A record amount of online shopping was done in December 2013, says the British Retail Consortium (BRC).
Close to one in five non-food items was bought online last month, according to the BRC survey.
There was also a 19.2% growth in internet purchases from a year earlier, the fastest increase in four years……..
The online retail boom was very much in evidence in late 2013, with many High Street chains expanding their internet offerings, and some shops reporting record figures for the amount customers purchased online around Christmas.
In a recent AccountingWEB survey on average survey respondents said more than 80% of their customers use a smartphones or a tablet and almost all expect this number to increase over the next 12 months.
Without an online presence your business is likely to be become invisible to your customers.
Its not just about having a website either, there needs to be something that will keep your customers visiting your website and you probably need an app….
I recently registered to use the HMRC Corporation Tax online services and my activation codes arrived today, so far I am impressed.
Obviously you need to know how to correctly do your Tax Computations first, nothing can remove the complicated tax calculations for Capital Allowances, Loans to Participators, Small Company Relief etc, you need skill for that part. But from reading the manual it seems that you can enter your accounts, computations and complete the CT600 and file it without needing to spend a fortune on specialist software to produce the iXBRL tagging now required.
Let’s see if I am still impressed when I try to enter the information.