HMRC and Internet Auction Sites

We have heard on the grapevine that HMRC has been taking an interest in and in some cases following up people whom they think are making frequent or regular sales on Internet auction sites.

Although not always clear cut and easy to apply, there are a number of long established principles or "badges of trade" which help decide whether someone’s activities amount to an adventure in the nature of trade.

One important test is to consider the seller’s intentions when he bought an article which he subsequently sells. If, for example, an article is purchased for private use and later this is sold, it would be difficult to argue that this is trading or in any way a business transaction.

If, however, something is purchased in anticipation of a later sale at a higher price this is likely to be successfully challenged as a business transaction and tax may well be payable.

Frequency and size of transactions also help to decide whether a trade or business is being conducted.