UK tax question concerning stamp collecting/dealing procedures etc

Stampboards has 1000s of regular readers who WILL take the time to help out even with the most basic question. If you are new to stamps - or taking up the hobby after a long break, there is a lot to learn. PLEASE do not be shy in asking the simplest of questions .. members here will be delighted to help you with the answers!

Moderator: Volunteer Moderator Team

Post Reply
User avatar
GB 789
RED Shooting Star Posting LEGEND!
RED Shooting Star Posting LEGEND!
Posts: 1137
Joined: 28 Oct 2015 02:50
Location: Worcester, England

UK tax question concerning stamp collecting/dealing procedures etc

Post by GB 789 »

tax-man-cartoon.jpg


First off please forgive the lack of photo on this post, the sort of post it is doesn’t really fit with any appropriate image (apart from maybe a tax man!)

My query is related to stamp dealing but where you are also a collector too. Obviously, I understand that if you buy with the intention of selling then tax would be paid on the profit from selling.

However, what would happen if, when becoming a dealer, you also sold off some of your own collection. Would tax have to be paid on those items? With items owned by yourself but without receipts when purchased you’d have no evidence that those items hadn’t been bought with the intention of selling so how do dealers in such circumstances deal with this issue?

Do you keep the two categories above separate for tax reasons? Equally, how long would something have to be ‘owned’ by you for it to be classed as from your collection rather than bought for profit. Eg if I found a stamp that I wanted for my collection but then 3 months later found a better example, so sold the first stamp, should tax on the sale be paid?

Many thanks for any advice on these matters.
User avatar
satsuma
I was online for post number TEN MILLION!
I was online for post number TEN MILLION!
Posts: 5159
Joined: 26 Dec 2015 13:52
Location: Auckland, New Zealand

Re: UK tax question concerning stamp collecting/ dealing

Post by satsuma »

I think you need to consider where the taxable entity's stock comes from.

If you, the collector wish to start dealing, then any stock you wish to sell should first be sold to the taxable entity, which becomes responsible for the future disposal of its new asset.

That taxable entity has a range of deductible costs, which can partially offset the tax due on any profit made on the stamp sales.

If you don't keep the taxable entity's books totally separate from your collection, you will face difficulties from accountants, tax agents and government employees.
User avatar
faro
RED Shooting Star Posting LEGEND!
RED Shooting Star Posting LEGEND!
Posts: 1312
Joined: 06 Feb 2016 13:10
Location: Aberdeenshire, United Kingdom

Re: UK tax question concerning stamp collecting/ dealing

Post by faro »

Before even considering becoming a dealer in a formal capacity, the first question is do you intend to try to make an overall profit of more than £12,300 per year - £24,600 if you're married or in a civil partnership.

If not (and it would probably take far higher goals to make it worth the hassle), your Capital Gains Tax Allowance(s) should suffice, presuming you're not already turning over large profits on other side ventures.
User avatar
GB 789
RED Shooting Star Posting LEGEND!
RED Shooting Star Posting LEGEND!
Posts: 1137
Joined: 28 Oct 2015 02:50
Location: Worcester, England

Re: UK tax question concerning stamp collecting/ dealing

Post by GB 789 »

faro wrote: 18 Sep 2020 08:01 Before even considering becoming a dealer in a formal capacity, the first question is do you intend to try to make an overall profit of more than £12,300 per year - £24,600 if you're married or in a civil partnership.

If not (and it would probably take far higher goals to make it worth the hassle), your Capital Gains Tax Allowance(s) should suffice, presuming you're not already turning over large profits on other side ventures.
It was more of a general question out of interest really however if I ever did decide to dabble In a larger capacity with stamps, I would also keep my other job so I would be over the tax free limit anyway to start with.

I guess that is another potential issue concerning tax if you have additional income from employment elsewhere, I can imagine it would start to get very complicated.
User avatar
GB 789
RED Shooting Star Posting LEGEND!
RED Shooting Star Posting LEGEND!
Posts: 1137
Joined: 28 Oct 2015 02:50
Location: Worcester, England

Re: UK tax question concerning stamp collecting/ dealing

Post by GB 789 »

satsuma wrote: 18 Sep 2020 07:23
If you, the collector wish to start dealing, then any stock you wish to sell should first be sold to the taxable entity, which becomes responsible for the future disposal of its new asset.

That taxable entity has a range of deductible costs, which can partially offset the tax due on any profit made on the stamp sales.

If you don't keep the taxable entity's books totally separate from your collection, you will face difficulties from accountants, tax agents and government employees.
Thanks for your explanation. Would this mean pretty much selling the stamps in your collection back to yourself as dealer? How would you assess the value to ‘sell’ at if selling to yourself?
User avatar
satsuma
I was online for post number TEN MILLION!
I was online for post number TEN MILLION!
Posts: 5159
Joined: 26 Dec 2015 13:52
Location: Auckland, New Zealand

Re: UK tax question concerning stamp collecting/ dealing

Post by satsuma »

GB 789 wrote: 18 Sep 2020 08:18
satsuma wrote: 18 Sep 2020 07:23
If you, the collector wish to start dealing, then any stock you wish to sell should first be sold to the taxable entity, which becomes responsible for the future disposal of its new asset.

That taxable entity has a range of deductible costs, which can partially offset the tax due on any profit made on the stamp sales.

If you don't keep the taxable entity's books totally separate from your collection, you will face difficulties from accountants, tax agents and government employees.
Thanks for your explanation. Would this mean pretty much selling the stamps in your collection back to yourself as dealer? How would you assess the value to ‘sell’ at if selling to yourself?
Well considering I'm not a UK citizen I suspect you'd do better to seek local professional advice to that question.
The difference between tax avoidance and tax evasion differ in different legal environments.
My comments were of a general nature, common to most such environments.
User avatar
ViccyVFU
WINNER! Stampboards Poster Of The Month
WINNER! Stampboards Poster Of The Month
Posts: 5468
Joined: 23 Feb 2018 23:49
Location: Harrogate, UK

Re: UK tax question concerning stamp collecting/ dealing

Post by ViccyVFU »

GB 789 wrote: 18 Sep 2020 06:29My query is related to stamp dealing but where you are also a collector too. Obviously, I understand that if you buy with the intention of selling then tax would be paid on the profit from selling.
There are threads here that advise you ""cannot collect and deal", but in fact I think its the most common model for serious collectors nowadays. (Although ask any full time dealer, and they will call it "collect, and dabble" :D )

First up, you need to envisage your planned scale of operations, and then check against HMRC guidelines on "badges of trade" to see if they can deduce you are collecting (rather than just "pursuing your hobby, without a profit motive").

HM Revenue & Customs (HMRC) now lists nine badges of trade:

•profit seeking motive.
•the number of transactions.
•the nature of the asset.
•existence of similar trading transactions or interests.
•changes to the asset.
•the way the sale was carried out.
•the source of finance.
•interval of time between purchase and sale.


Guidance on badges of trade can be found here ....
http://www.gov.uk/hmrc-internal-manuals/business-income-manual/bim20205]


Some examples, from case law, can be found here ....
http://www.accaglobal.com/my/en/technical-activities/technic ... trade.html

What the taxman is after, in laymans terms, is "a share of any profits you make".
(Note the word PROFIT .... whilst turnover is relatively easy, profit is quite elusive for the collector/dealer).

GB 789 wrote: 18 Sep 2020 06:29 However, what would happen if, when becoming a dealer, you also sold off some of your own collection. Would tax have to be paid on those items? With items owned by yourself but without receipts when purchased you’d have no evidence that those items hadn’t been bought with the intention of selling so how do dealers in such circumstances deal with this issue?
On what scale are we talking? The taxman is very unlikely to get too excited "if you are not making over £1000 PROFIT, on sale of excess stamps, that are a natural by-product of your collection". (I've heard of numbers much higher, but you should not rely on those).

First up, if you intention is "to buy, to sell" (i.e. the profit motive") you MUST keep proper records. This is important to establish "whose stock is whose", and "the necessary profit calculations".

Indeed, if you were trading on a separate account, and it all went belly up (sadly, a reality for some), the a bailiff can pretty much dip his shovel in your stores UNLESS you have proper records on "who owns what".

GB 789 wrote: 18 Sep 2020 06:29 Do you keep the two categories above separate for tax reasons? Equally, how long would something have to be ‘owned’ by you for it to be classed as from your collection rather than bought for profit. Eg if I found a stamp that I wanted for my collection but then 3 months later found a better example, so sold the first stamp, should tax on the sale be paid?
There is no exact timescale ... the taxman likes to look at "intent, at time of purchase". If you bought it in the normal process of collection, and sold it after a week, or ten years, it would not make a difference "if the actual purchase motive was to enhance the collection".

Capital Gains Tax has also been mentioned. This is NOT the same as Income Tax, which usually consists of employment, income from property, trading, money on deposit etc. It has a completely separate (additional) allowance, which smooth out income made on your investment assets.

If you are thinking of dabbling, and "trimming as you go", then a reasonably neutral income from stamps is not going to be a problem "worth even mentioning to the tax man".

However, if you are "going large", with massive sales on eBay, then you should seek out "a local accountants advice" (first consultation is usually free) on the "best form for your trading".

Remember that the taxman is routinely informed when eBay sales are over a trigger amount, and that other considerations, like eBay trader status (guaranteed returns, more costs etc) also come into play.

(The other big flag is that the taxman can demand records "for the last six years", so just because "you get away with it for a year"..... you are not in the clear for a further six).

No disrespect to Satsuma, but with you "living in the UK" you are only going to be subject to UK tax laws (Not even Scottish variants), so please make sure you verify "any of the statements made here, before relying on them in your investigations". (Edit - Satsuma has acknowledged this point himself "whilst I was typing" :D ).

In the UK, its not really a case of "selling it back to yourself", unless you formed a completely separate entity (limited company). In that case, you being connected to the only director in the company, it would be regarded as a connected transaction, and would require "INDEPENDANT assessment of valuation, on transfer". You "selling to the company" would be subject to Capital Gains Tax in the year of disposal, and their "take on values" would be the sum they paid to you.

Please feel free to ask more questions .... But none of this should be construed as tax advice .... its more "a conversation, down the pub" (remember those?).
.
User avatar
faro
RED Shooting Star Posting LEGEND!
RED Shooting Star Posting LEGEND!
Posts: 1312
Joined: 06 Feb 2016 13:10
Location: Aberdeenshire, United Kingdom

Re: UK tax question concerning stamp collecting/ dealing

Post by faro »

GB 789 wrote: 18 Sep 2020 08:15
faro wrote: 18 Sep 2020 08:01
Before even considering becoming a dealer in a formal capacity, the first question is do you intend to try to make an overall profit of more than £12,300 per year - £24,600 if you're married or in a civil partnership.

If not (and it would probably take far higher goals to make it worth the hassle), your Capital Gains Tax Allowance(s) should suffice, presuming you're not already turning over large profits on other side ventures.
It was more of a general question out of interest really however if I ever did decide to dabble In a larger capacity with stamps, I would also keep my other job so I would be over the tax free limit anyway to start with.

That's not the way it works. The CGT Allowance is in addition to any salary you might have - it doesn't matter if that's £5,000 or £50,000, you're allowed to make an additional £12,300/£24,600 in overall profit (profits minus any losses) in 2020/21 tax free.

Depending on how a stamp "collection" is counted, sales of items within that might not even trigger the £6,000 limit before they are considered for CGT calculation purposes.
.
User avatar
kenlondon
Senior Member Advanced Posting Guru
Senior Member Advanced Posting Guru
Posts: 109
Joined: 10 May 2020 04:07
Location: London, United Kingdom

Re: UK tax question concerning stamp collecting/ dealing

Post by kenlondon »

.
One of the things holding me back from registering as a seller on ebay (read "excuses" if you so wish), is that I personally am registered for VAT.

There is no separate legal entity (a limited company) where I can say VAT applies for this kind of transaction, but not for this type of transaction.

As I have no intention of trading in stamps, merely offloading a glut of repeats, can I safely say that I am not registered for VAT in this scenario?
Disclaimer: I am not an expert - I am here to learn, so if anything I say is wrong, please say so!
User avatar
ViccyVFU
WINNER! Stampboards Poster Of The Month
WINNER! Stampboards Poster Of The Month
Posts: 5468
Joined: 23 Feb 2018 23:49
Location: Harrogate, UK

Re: UK tax question concerning stamp collecting/ dealing

Post by ViccyVFU »

.
kenlondon wrote: 18 Sep 2020 18:42 One of the things holding me back from registering as a seller on ebay (read "excuses" if you so wish), is that I personally am registered for VAT. There is no separate legal entity (a limited company) where I can say VAT applies for this kind of transaction, but not for this type of transaction. As I have no intention of trading in stamps, merely offloading a glut of repeats, can I safely say that I am not registered for VAT in this scenario?

Ah....... when is the answer anything other than "it depends" on this type of question?

Lets paint a scenario - You are a Pimlico Plumber (or refurbish Faberge Eggs), based from home.
Turnover, as a sole trader, is thus sufficient for you "to warrant being registered for VAT".

(For non UK people, VAT - Value Added Tax is a tax / levy on the final consumer of certain classes of goods, similar to TVA, and GST etc.

People registered for tax can claim their "input tax" suffered against "output tax", so you only pay to the taxman "a net amount of tax", usually each quarter, based on your sales, and commensurate with the value you have added in the supply chain).

As to whether you would have to charge VAT on stamps you sell, then the basic answer would usually be no, "if you were just selling personal assets you had no further use for".

HOWEVER, if you had claimed input tax on the purchase, when you bought them, then the taxman would regard them "in scope" when disposing of them.

As a sole trader, unless stamps were within the remit of your sole trading (antique dealer, etc), then any disposal would be regarded as outside VAT scope (but obviously subject to income tax or CGT, dependant on other criteria).

As you note, it is "an excuse, without merit" in terms of "doing nothing". You can easily sell a couple of grand of household items / collectables from the garage / loft on eBay, without the taxman being interested at all.

PROFIT is what drives them - They just want their share.

(As ever, this should NOT be construed as tax advice, specific to your circumstances.

There are so many unknowns, we can only really discuss "general principles / observations" here).
.
User avatar
kenlondon
Senior Member Advanced Posting Guru
Senior Member Advanced Posting Guru
Posts: 109
Joined: 10 May 2020 04:07
Location: London, United Kingdom

Re: UK tax question concerning stamp collecting/ dealing

Post by kenlondon »

ViccyVFU wrote: 18 Sep 2020 19:41 .
kenlondon wrote: 18 Sep 2020 18:42 One of the things holding me back from registering as a seller on ebay (read "excuses" if you so wish), is that I personally am registered for VAT. There is no separate legal entity (a limited company) where I can say VAT applies for this kind of transaction, but not for this type of transaction. As I have no intention of trading in stamps, merely offloading a glut of repeats, can I safely say that I am not registered for VAT in this scenario?

Ah....... when is the answer anything other than "it depends" on this type of question?

Lets paint a scenario - You are a Pimlico Plumber (or refurbish Faberge Eggs), based from home.
Turnover, as a sole trader, is thus sufficient for you "to warrant being registered for VAT".

(For non UK people, VAT - Value Added Tax is a tax / levy on the final consumer of certain classes of goods, similar to TVA, and GST etc.

People registered for tax can claim their "input tax" suffered against "output tax", so you only pay to the taxman "a net amount of tax", usually each quarter, based on your sales, and commensurate with the value you have added in the supply chain).

As to whether you would have to charge VAT on stamps you sell, then the basic answer would usually be no, "if you were just selling personal assets you had no further use for".

HOWEVER, if you had claimed input tax on the purchase, when you bought them, then the taxman would regard them "in scope" when disposing of them.

As a sole trader, unless stamps were within the remit of your sole trading (antique dealer, etc), then any disposal would be regarded as outside VAT scope (but obviously subject to income tax or CGT, dependant on other criteria).

As you note, it is "an excuse, without merit" in terms of "doing nothing". You can easily sell a couple of grand of household items / collectables from the garage / loft on eBay, without the taxman being interested at all.

PROFIT is what drives them - They just want their share.

(As ever, this should NOT be construed as tax advice, specific to your circumstances.

There are so many unknowns, we can only really discuss "general principles / observations" here).
.
Thank you Viccy, informative as always, almost entertaining sometimes to have a boring subject illuminated with the ViccyVFU treatment. I will now need a different excuse to prevent me from signing up as an ebay seller.
Disclaimer: I am not an expert - I am here to learn, so if anything I say is wrong, please say so!
User avatar
ViccyVFU
WINNER! Stampboards Poster Of The Month
WINNER! Stampboards Poster Of The Month
Posts: 5468
Joined: 23 Feb 2018 23:49
Location: Harrogate, UK

Re: UK tax question concerning stamp collecting/ dealing

Post by ViccyVFU »

kenlondon wrote: 18 Sep 2020 20:33 I will now need a different excuse to prevent me from signing up as an ebay seller.
Not sure who you need the excuse for....

If its for other SB members, say "the Sheriff doesn't recommend it"

If its your Bank Manager, say "I'm just waiting for SG to make a profit" (That's good for another 5 years, at least).

If its for a significant other, and the boxes are piled so high in the hall its hard to get past them, well, "they may have a point" :D


remind.jpg
User avatar
norvic
WINNER! Stampboards Poster Of The Month
WINNER! Stampboards Poster Of The Month
Posts: 35027
Joined: 25 Feb 2008 21:51
Location: Norfolk, England
Contact:

Re: UK tax question concerning stamp collecting/ dealing

Post by norvic »

GB 789 wrote: 18 Sep 2020 08:15 It was more of a general question out of interest really however if I ever did decide to dabble In a larger capacity with stamps, I would also keep my other job so I would be over the tax free limit anyway to start with.

I guess that is another potential issue concerning tax if you have additional income from employment elsewhere, I can imagine it would start to get very complicated.
Not really.

You account for the income and allowable* expenditure on the philatelic trading and declare the taxable income.

You complete a self-assessment return upon which you show that income on one page, and your employment/pension income on another.

[And if relevant, as when we started, rental income on another.]

* I believe you can do this on a cash basis, and provided your turnover is less than a certain figure, you don't have to provide itemised detailed accounts. For some traders the 'certain figure' is the same as the VAT threshold which is (I believe) £86,000, so for what you are discussing, summary accounts acceptable, and you may not even need an accountant, just be wise to what the rules are, depending on how good you are at keeping records.
Ian Billings - Norvic Philatelics - clearing Machins stock see Modern GB Blog Also almost everything non-GB postal history & postcards I show here is for sale: DM for details.
Mystery Postcard Nos: 265, 290/1/3, 304, 310, 320/2/4/6-8, 331/7/8, 344/6, 353/8, 360/1/3
User avatar
Nick777VVV
AQUA Shooting Star Board ADDICT!
AQUA Shooting Star Board ADDICT!
Posts: 512
Joined: 29 Mar 2008 00:03
Location: United Kingdom

Re: UK tax question concerning stamp collecting/dealing

Post by Nick777VVV »

The above advice seems relatively straightforward if you were buying (for example) a stamp collection for £1000 and then selling it for £1500. You would then be paying tax on the £500 profit, less any costs.

But what if the contents of that £1000 purchase get broken down and put 'into stock'? Which could then take 10 years to shift in its entirity?

How would you track the theoretical profit on every stamp sold? Sounds like a nightmare.

Would be interested to here how dealers on the board handle this scenario, which I presume must be very common.
User avatar
norvic
WINNER! Stampboards Poster Of The Month
WINNER! Stampboards Poster Of The Month
Posts: 35027
Joined: 25 Feb 2008 21:51
Location: Norfolk, England
Contact:

Re: UK tax question concerning stamp collecting/dealing

Post by norvic »

You don't need to itemise everything if you work on the cash basis, is my understanding.

Have a look at HMRCs latest tax advice for (Stamp) Dealers.
Ian Billings - Norvic Philatelics - clearing Machins stock see Modern GB Blog Also almost everything non-GB postal history & postcards I show here is for sale: DM for details.
Mystery Postcard Nos: 265, 290/1/3, 304, 310, 320/2/4/6-8, 331/7/8, 344/6, 353/8, 360/1/3
User avatar
Nick777VVV
AQUA Shooting Star Board ADDICT!
AQUA Shooting Star Board ADDICT!
Posts: 512
Joined: 29 Mar 2008 00:03
Location: United Kingdom

Re: UK tax question concerning stamp collecting/dealing

Post by Nick777VVV »

Could you explain more about what you mean by 'cash basis' Norvic? I'm not familiar with this.

I couldn't find the HMRC advice you were referring to, so if you've a link that would be most helpful.

Thanks
User avatar
OldColdStar
Black Ninja Star! Board Posting Addict.
Black Ninja Star! Board Posting Addict.
Posts: 69
Joined: 22 Mar 2023 19:42
Location: Buxton, England, UK

Re: UK tax question concerning stamp collecting/dealing

Post by OldColdStar »

I'm not a stamp dealer but I did run a small business in the UK before retiring.

As NORVIC says you would probably run the business on a cash basis. HMRC allow you to do this for most small businesses up to a £150,000 per year turnover.

Cash accounting essentially means you record the cash that comes into your business each year through sales (whatever you sell to customers) and subtract the cash that goes out of your business each year through purchases (all the stock you buy and other expenses of the business such as shipping, equipment (your Canon LIDE scanner for example!!) etc. The difference is your taxable annual profit (or loss!). Repeat every year. There is a bit more to this, but there are very simple guides on the HMRC website.

If you run the business for many years you might end up with a lot of surplus unsold stock that might be worth a lot (or might have been eaten by mice and worth nothing!). If you sell the business the stock will be part of its assets and you might have to pay capital gains tax on the price you receive for selling the business. If you just shut it down and keep the stock you will have to account for this to HMRC in your final accounts. A good accountant will be required at this point if the stock has high value (or a pest control officer if its all been eaten by mice!).

If you have a larger business you need to use standard accounting procedures for Profit/Loss statement and balance sheet for the business. This involves valuing inventory (stock) at the end of each year to determine the value of this "asset" for using in the balance sheet.
User avatar
OldColdStar
Black Ninja Star! Board Posting Addict.
Black Ninja Star! Board Posting Addict.
Posts: 69
Joined: 22 Mar 2023 19:42
Location: Buxton, England, UK

Re: UK tax question concerning stamp collecting/dealing procedures etc

Post by OldColdStar »

Last edited by OldColdStar on 03 Jan 2024 01:15, edited 1 time in total.
User avatar
billw2
2500 Stampboards Post - Senior Guru
2500 Stampboards Post - Senior Guru
Posts: 2610
Joined: 02 Nov 2010 08:51
Location: Las Vegas Nevada, USA

Re: UK tax question concerning stamp collecting/dealing procedures etc

Post by billw2 »

For your own collection…. Does the UK charge tax on capital gains? Here in the US capital gains are taxable either as regular income (iirc if the item in question was owned less than a year) otherwise at 20%.

So if I buy a cover for $100 and sell it 10 years later for $200 I have a $100 capital gain and that’s taxed at 15-20% but there’s about a $45,000 exemption currently. But if I buy a cover for $100 and sell it for $200 6 months later then the $100 is taxed as ordinary income.
User avatar
Nick777VVV
AQUA Shooting Star Board ADDICT!
AQUA Shooting Star Board ADDICT!
Posts: 512
Joined: 29 Mar 2008 00:03
Location: United Kingdom

Re: UK tax question concerning stamp collecting/dealing

Post by Nick777VVV »

OldColdStar wrote: 03 Jan 2024 01:12 I'm not a stamp dealer but I did run a small business in the UK before retiring.

As NORVIC says you would probably run the business on a cash basis. HMRC allow you to do this for most small businesses up to a £150,000 per year turnover.

Cash accounting essentially means you record the cash that comes into your business each year through sales (whatever you sell to customers) and subtract the cash that goes out of your business each year through purchases (all the stock you buy and other expenses of the business such as shipping, equipment (your Canon LIDE scanner for example!!) etc. The difference is your taxable annual profit (or loss!). Repeat every year. There is a bit more to this, but there are very simple guides on the HMRC website.

If you run the business for many years you might end up with a lot of surplus unsold stock that might be worth a lot (or might have been eaten by mice and worth nothing!). If you sell the business the stock will be part of its assets and you might have to pay capital gains tax on the price you receive for selling the business. If you just shut it down and keep the stock you will have to account for this to HMRC in your final accounts. A good accountant will be required at this point if the stock has high value (or a pest control officer if its all been eaten by mice!).

If you have a larger business you need to use standard accounting procedures for Profit/Loss statement and balance sheet for the business. This involves valuing inventory (stock) at the end of each year to determine the value of this "asset" for using in the balance sheet.
That's very helpful thank you.

If I'm reading things correctly, if the total value of purchases in any given year exceeded the sales in the same year, then no tax is due?

Probably worth me mentioning that I resurrected this thread after the announcement on the BBC today:

https://www.bbc.co.uk/news/business-67855872

No doubt many Stampboards readers will be affected...
User avatar
OldColdStar
Black Ninja Star! Board Posting Addict.
Black Ninja Star! Board Posting Addict.
Posts: 69
Joined: 22 Mar 2023 19:42
Location: Buxton, England, UK

Re: UK tax question concerning stamp collecting/dealing procedures etc

Post by OldColdStar »

Re capital gains tax on personal stamp collections in the UK see:
https://www.gov.uk/capital-gains-tax-personal-possessions

Determining if a gain is taxed as income or capital gains can be a bit complex in the UK! If HMRC gets involved and decides your a "trader" it will be taxed as income, if you can persuade them your NOT a trader if will be taxed as capital gains.
User avatar
norvic
WINNER! Stampboards Poster Of The Month
WINNER! Stampboards Poster Of The Month
Posts: 35027
Joined: 25 Feb 2008 21:51
Location: Norfolk, England
Contact:

Re: UK tax question concerning stamp collecting/dealing

Post by norvic »

Nick777VVV wrote: 03 Jan 2024 01:22
Probably worth me mentioning that I resurrected this thread after the announcement on the BBC today:

https://www.bbc.co.uk/news/business-67855872

No doubt many Stampboards readers will be affected...
Airbnb, eBay, Vinted and other apps to share more information with HMRC
Are you raking it in selling clothes online? Is letting out your spare room proving a nice little earner?

People who make money from online "side hustle" activities like these will find the tax net tightening this year.

From 1 January firms including Vinted, Airbnb, and eBay are obliged to collect and share details of such transactions with the tax authorities.

That will allow HMRC to home in on anyone who should be declaring the extra income but isn't.

While HMRC was already able to request information from UK-based online operators, from the start of this year there are new rules that the UK has signed up to via the international body, the Organisation for Economic Cooperation and Development (OECD), as part of a global effort to clamp down on tax dodgers.

The new rules require digital platforms to report the income sellers are getting through their site routinely. It will apply to sales of goods such as things that have been handcrafted and second hand clothes, but also services including taxi hire, food delivery, freelance work and short-term accommodation lets or even renting out your driveway for parking.

The information will be shared between countries that have signed up to the OECD tax rules.

The government said the new rules would help it "bear down on tax evasion", as sellers on digital platforms would now be treated more like traditional businesses.

An HMRC spokesperson said: "These new rules will support our work to help online sellers get their tax right first time. They will also help us detect any deliberate non-compliance, ensuring a level playing field for all taxpayers."

Firms' first obligation to report information to HMRC will be at the end of January 2025 and will include information such as the tax ID, bank account details, and the value and volume of transactions for sellers whose activity is of significant enough size.
Bloody good job. About time some of those big sellers started paying tax on their new issues of stamps. Only fly in the ointment is that private sellers don't yet have to give any tax ID to eBay (and probably not the others).
Ian Billings - Norvic Philatelics - clearing Machins stock see Modern GB Blog Also almost everything non-GB postal history & postcards I show here is for sale: DM for details.
Mystery Postcard Nos: 265, 290/1/3, 304, 310, 320/2/4/6-8, 331/7/8, 344/6, 353/8, 360/1/3
User avatar
OldColdStar
Black Ninja Star! Board Posting Addict.
Black Ninja Star! Board Posting Addict.
Posts: 69
Joined: 22 Mar 2023 19:42
Location: Buxton, England, UK

Re: UK tax question concerning stamp collecting/dealing procedures etc

Post by OldColdStar »

If I'm reading things correctly, if the total value of purchases in any given year exceeded the sales in the same year, then no tax is due?
Basically your correct however you do still have to register with HMRC as a sole trader and declare your business income (sales) and costs (purchases) on your personal self assesment tax return even if the tax payable is zero.

Good point about the recent change in HMRC treatment of income derived from online sales such as ebay, starting 1st Jan 2024. Anyone who sells stamps on ebay or similar sites will now have there sales details automatically reported to HMRC every year. If you dont sell any more than £1000 a year you dont have to worry but above this level HMRC might start to wonder if you should be registered as self employed / sole trader. Anyone in the UK who sells stamps should be aware of these new rules and take approriate action!
User avatar
colinscovers
AQUA Shooting Star Board ADDICT!
AQUA Shooting Star Board ADDICT!
Posts: 567
Joined: 25 Oct 2009 20:54
Location: Leeds, UK

Re: UK tax question concerning stamp collecting/dealing procedures etc

Post by colinscovers »

If you decide to use eBay to sell your collection should it be income tax or capital gains tax? Whichever, for me it would be very difficult to prove the original buying price and when. Or is selling your collection not considered trading?
User avatar
OldColdStar
Black Ninja Star! Board Posting Addict.
Black Ninja Star! Board Posting Addict.
Posts: 69
Joined: 22 Mar 2023 19:42
Location: Buxton, England, UK

Re: UK tax question concerning stamp collecting/dealing procedures etc

Post by OldColdStar »

If you decide to use eBay to sell your collection should it be income tax or capital gains tax? Whichever, for me it would be very difficult to prove the original buying price and when. Or is selling your collection not considered trading
Not clear cut I’m afraid! In general terms if you’re selling a personal collection of stamps or whatever then capital gains tax should probably apply.

Hmrc might want you to pay income tax if they consider your a “trader”. The “badges of trade” are detailed by hmrc here:
https://www.gov.uk/hmrc-internal-manuals/business-income-manual/bim20205

Also see https://www.gov.uk/government/publications/selling-online-a ... tion-sheet
User avatar
OldColdStar
Black Ninja Star! Board Posting Addict.
Black Ninja Star! Board Posting Addict.
Posts: 69
Joined: 22 Mar 2023 19:42
Location: Buxton, England, UK

Re: UK tax question concerning stamp collecting/dealing procedures etc

Post by OldColdStar »

You might also want to use the HMRC tool at https://www.gov.uk/check-additional-income-tax to determine if you need to notify HMRC of any income you get from selling a personal stamp collection.
User avatar
faro
RED Shooting Star Posting LEGEND!
RED Shooting Star Posting LEGEND!
Posts: 1312
Joined: 06 Feb 2016 13:10
Location: Aberdeenshire, United Kingdom

Re: UK tax question concerning stamp collecting/dealing procedures etc

Post by faro »

OldColdStar wrote: 03 Jan 2024 04:59Hmrc might want you to pay income tax if they consider your a “trader”. The “badges of trade” are detailed by hmrc here:
https://www.gov.uk/hmrc-internal-manuals/business-income-manual/bim20205
Yes; and those are worth copying here, to clarify "sales of personal possessions" where that is indeed the case, should the taxman take an interest. (That the Capital Gains Tax allowance keeps reducing for those is a separate matter...)

<clip>
BIM20205 - Meaning of trade: badges of trade: summary

A summary of each ‘badge of trade’ is shown below with a brief pointer to its meaning.

Profit-seeking motive - An intention to make a profit supports trading, but by itself is not conclusive.

The number of transactions - Systematic and repeated transactions will support ‘trade’.

The nature of the asset - Is the asset of such a type or amount that it can only be turned to advantage by a sale? Or did it yield an income or give ‘pride of possession’, for example, a picture for personal enjoyment?

Existence of similar trading transactions or interests - Transactions that are similar to those of an existing trade may themselves be trading.

Changes to the asset - Was the asset repaired, modified or improved to make it more easily saleable or saleable at a greater profit?

The way the sale was carried out - Was the asset sold in a way that was typical of trading organisations? Alternatively, did it have to be sold to raise cash for an emergency?

The source of finance - Was money borrowed to buy the asset? Could the funds only be repaid by selling the asset?

Interval of time between purchase and sale - Assets that are the subject of trade will normally, but not always, be sold quickly. Therefore, an intention to resell an asset shortly after purchase will support trading. However, an asset, which is to be held indefinitely, is much less likely to be a subject of trade.

Method of acquisition - An asset that is acquired by inheritance, or as a gift, is less likely to be the subject of trade.

Despite it being easy enough to lean into "sale of personal possessions" I'd prepare for a "because you sell on eBay and traders sell on eBay, you must be a trader" approach to be used under the "The way the sale was carried out - Was the asset sold in a way that was typical of trading organisations?" category, despite the specific case referred to being 80+ years ago; long before the concept of open selling platforms for all, trade and public.

Avoiding selling multiple identical items on a single listing would appear to be a smart move, anyhow, regardless of how long they've been in one's collection.
User avatar
blue-within-blue
BLUE Shooting Star Posting GURU!!
BLUE Shooting Star Posting GURU!!
Posts: 832
Joined: 11 Nov 2020 06:49
Location: Lancashire, England

Re: UK tax question concerning stamp collecting/dealing procedures etc

Post by blue-within-blue »


The Ebay notice hasn't really changed anything, and certainly has not changed HMRC's treatment of trading income which comes from Ebay selling. People who trade on Ebay have always been under a legal obligation to declare that trading income for tax purposes, whether they are registered as a private or business seller. There's no difference for tax purposes between selling goods remotely on Ebay and selling those same goods at a market stall or high-street shop.

Several years ago, I sent HMRC a direct enquiry about basically the same issues raised by the original poster here. I'm already a sole trader buying & selling other collectibles. I put 3 scenarios to them and asked whether I need to report these transactions - either as trading income or a capital gain :

Scenario 1 : I sell a stamp from my own collection for a higher price than I originally paid. When I bought it - which might have been a few months or up to 50 years ago - it was with the intention of having it as part of my collection, not to make a profit. And when I sell it, that's because I have stopped collecting that area or have obtained a better example, not to make a profit.

Scenario 2 : I sometimes buy an auction lot consisting of several stamps, with the intention of keeping one or two items for my collection and selling the others to offset the cost. Those sales may result in an overall loss, or break-even, or a small profit - but the latter would be a bonus, not the intention when buying.

Scenario 3 : Occasionally I buy a stamp which appears to have been on sale cheaply, with the intention of selling on at a profit. I make this decision based on many years experience as a collector, not as a stamp trader. Does the intention to make a profit bring such items within the scope of my other trading activities? And if I keep such items for a while to fill a gap in my own collection before selling, at what point do they become capital assets within the CGT rules, rather than the income tax rules?

HMRC replied :
"To determine whether or not an activity amounts to trading, you need to consider the "badges of trade". These are detailed in our Business Income Manual at BIM20205.

Your scenarios 1 and 2 appear to fall under the Capital Gains regime and be regarded as the disposal of chattels, rather than a trading activity. Helpsheet 283 which you can download from our website GOV.UK explains how chattels are treated for CGT.

Under the "badges of trade", an intention to make a profit does indicate trading, but if scenario 3 is a one-off and not part of systematic and repeated transactions, this also appears to fall under the CGT regime and should be considered as the disposal of a chattel.

it is the activity surrounding the items which dictates the tax treatment, wihout needing to determine at what point the item becomes an asset. Generally, as soon as you acquire an item it will become an asset, though not necessarily one which is liable to CGT.
"

The Business Income Manual (which is aimed at tax inspectors, not the public) says at para 20210 :

"Meaning of trade ; badges of trade ; profit-seeking motive
Evidence that the sole object of acquiring an asset was to re-sell it at a profit, without any intention of holding it as an investment, is a pointer to the conclusion that a trade is being carried on. However, the presence of a profit-seeking motive is not necessarily a decisive pointer to the existence of a trade. It is only one factor to be weighed along with all the other relevant factors.".

Para 20275 covers situations where you add value or marketability - for example by obtaining an expert certificate for a stamp before re-selling, or breaking up a collection :

"Badges of trade : modification of the asset
What happens to the asset pending resale may be a relevant factor. There may be modifications to the asset by way of processing or manufacture, or some kind of adaptation to make it more readily marketable. All these actions are typical of trading activities.
Similarly, the breaking down of assets into smaller lots to facilitate a sale may be a pointer to a trading motive ...
."

Para 20310 clarifies about delay :
Badges of trade : interval of time between purchase and sale
"The interval between purchase and sale may be important. A person who buys an asset and holds it for many years before disposing of it may be in a stronger position to argue that this is the realisation of an investment, than if a sale follows very soon after purchase. If you can show an intention, at the time of purchase, to sell quickly, that supports the idea of trading because trading implies the idea of turning over assets for profit".

ROB
User avatar
Goodwin
PLATINUM Star Serious Stamp Poster
PLATINUM Star Serious Stamp Poster
Posts: 495
Joined: 13 Nov 2012 20:16
Location: Milton Keynes, UK

Re: UK tax question concerning stamp collecting/dealing procedures etc

Post by Goodwin »

Well this is all a pain in the proverbial as I planned on eBaying off most of my GB collection this year!

The Helpsheet 283 seems to be Helpsheet 293 and is available here.

Mainly collecting GB, working back from QEII. Often side-tracked into Japan, GB-era Hong Kong definitives, Ceylon and Australia pre-decimal.
User avatar
Global Admin
The Sheriff
The Sheriff
Posts: 76409
Joined: 18 Apr 2007 22:57
Location: Tombstone, Oz
Contact:

Re: UK tax question concerning stamp collecting/dealing procedures etc

Post by Global Admin »

Aaah, I love when faceless taxmen try and explain things 'briefly and clearly'!


Example 1

You sell an antique mirror for £7,500 that originally cost you £1,500. There were incidental costs of sale totalling £250. The disposal proceeds exceed £6,000.

Calculate the amount by which the disposal proceeds exceed £6,000:

Deduct £6,000 from the sale price of £7,500. This comes to £1,500.
Multiply this by 5÷3 (£1,500 × 5÷3) which equals £2,500.

This is the maximum chargeable gain.

Now you can work out the actual gain. Your calculation will be:

Take disposal proceeds of £7,500.
Deduct the sale expenses of £250 (£7,500 − £250 = £7,250).
Now take away £1,500 (the original cost of the mirror) from £7,250. This gives you an actual gain figure of £5,750.
Compare this with the maximum chargeable gain and enter the lower figure, which is £2,500.
.
Click HERE to see superb RARE & unusual stamps - FIXED low nett prices, high rez pix + NO 20% buyer fees!
User avatar
faro
RED Shooting Star Posting LEGEND!
RED Shooting Star Posting LEGEND!
Posts: 1312
Joined: 06 Feb 2016 13:10
Location: Aberdeenshire, United Kingdom

Re: UK tax question concerning stamp collecting/dealing procedures etc

Post by faro »

blue-within-blue wrote: 03 Jan 2024 23:46
The Ebay notice hasn't really changed anything, and certainly has not changed HMRC's treatment of trading income which comes from Ebay selling. People who trade on Ebay have always been under a legal obligation to declare that trading income for tax purposes, whether they are registered as a private or business seller. There's no difference for tax purposes between selling goods remotely on Ebay and selling those same goods at a market stall or high-street shop.

Several years ago, I sent HMRC a direct enquiry

<clip>
Rob, your reply from HMRC is very useful to have in writing.
Thank you for this, which is of use to anyone seeking quotable examples and replies rather than "starting from scratch" should there be any attempt to "presume guilt" (i.e. that if it looks like you're trading you must be trading, and where anyone gives a careless response to HMRC that's treated as a "got 'em").

The CGT regime will also become more problematic from 1st April 2024 when the annual allowance decreases yet again; from £6,000 to £3,000 this time.

When this was £12,300 in previous years it was barely a concern to sell any personal possessions. Now, less so, especially should it become difficult to work around the lack of a formal receipt for item(s) purchased "for pleasure" decades ago which may have been purchased individually or as part of a larger collection.

=

To add to the general fun, eBay will now be charging an additional fee to send all our information to the tax people. :)

https://www.ebay.co.uk/sellercentre/news/2024-february/regulatory-operating-fee
Learn about the new regulatory operating fee

What you need to now

As a global ecommerce platform connecting millions of buyers and sellers in more than 190 markets, we're committed to offering a trusted global marketplace in a complex regulatory environment that affects eBay and our sellers.

To address the rising costs associated with the increasing number and complexity of regulations, including consumer and environmental protection, as well as new taxation and customs measures, we're introducing a new regulatory operating fee.

From 8 April 2024, this new regulatory operating fee will apply to all sales from listings on the following sites: UK, Austria, Belgium, France, Italy, Ireland, Netherlands, Poland, Spain, and Switzerland.

How the regulatory operating fee is calculated

This fee is calculated as a fixed percentage rate (0.35%) of the total amount of the sale (which includes the item price, postage, taxes and any other applicable fees), and is subject to Value Added Tax (VAT), where applicable.
User avatar
norvic
WINNER! Stampboards Poster Of The Month
WINNER! Stampboards Poster Of The Month
Posts: 35027
Joined: 25 Feb 2008 21:51
Location: Norfolk, England
Contact:

Re: UK tax question concerning stamp collecting/dealing procedures etc

Post by norvic »

faro wrote: 22 Feb 2024 07:20
https://www.ebay.co.uk/sellercentre/news/2024-february/regulatory-operating-fee
Learn about the new regulatory operating fee

From 8 April 2024, this new regulatory operating fee will apply to all sales from listings on the following sites: UK, Austria, Belgium, France, Italy, Ireland, Netherlands, Poland, Spain, and Switzerland.
I wonder why not all of the EU countries, given that the same rules on imports apply across the board (as well as the UK and Switzerland).
Ian Billings - Norvic Philatelics - clearing Machins stock see Modern GB Blog Also almost everything non-GB postal history & postcards I show here is for sale: DM for details.
Mystery Postcard Nos: 265, 290/1/3, 304, 310, 320/2/4/6-8, 331/7/8, 344/6, 353/8, 360/1/3
User avatar
blue-within-blue
BLUE Shooting Star Posting GURU!!
BLUE Shooting Star Posting GURU!!
Posts: 832
Joined: 11 Nov 2020 06:49
Location: Lancashire, England

Re: UK tax question concerning stamp collecting/dealing procedures etc

Post by blue-within-blue »


You're welcome faro - I'm glad it was helpful.

At first glance, this year's reduction of the exempt amount to £3000 appears to bring a lot more people into the CGT "net". But that reduction is combined with a change to the reporting limit, which goes a long way to offsetting the effect of the change.

In past years, the reporting limit required people within the self-assessment scheme to complete the CGT tax return pages only where the total of all sales of chargeable assets exceeded four times the exempt amount. But that "formula" is being removed - the reporting limit is now fixed at £50,000, along with the exempt amount being fixed at £3000 (or at least until a change of Government - which may not be long coming ...).

ROB
Post Reply

Return to “NO question is too basic or silly - you ask - we WILL help you with it!”

Who is online

Users browsing this forum: No registered users and 1 guest