Are you a regular seller on eBay? Are you proud of your perfect feedback? Are you pleased with the money you have made buying and selling things online? Did you know that the profits you make from trading on online auction sites are probably taxable and that HM Revenue and Customs (HMRC) is looking for you? Did you know the profits of regular buying and selling at car-boot sales are also taxable?

HMRC have invested in a search engine tool to look for regular traders on eBay who do not declare their profits and/or who have not registered for VAT despite having a turnover above the VAT limit. HMRC expect to earn an additional £1m annually in VAT as a result. The initiative follows a successful targeting of regular car-boot sale traders, which has swollen the coffers of HMRC with additional income tax.

Undertaking transactions with a view to profit is taxable, but merely selling something one-off for more than you bought it normally isn’t. Certain one-off transactions may be subject to Capital Gains Tax (or, less frequently, Income Tax), although these are comparatively rare. The ‘badges of trade’ are many and varied, but if you buy and sell regularly and do so with a view to making a profit, HMRC will almost certainly consider you to be trading.

If you are trading, remember that your eBay fees, postage costs and other fees such as PayPal charges will be deductible from your profits. Failure to advise HMRC of commencing to trade and failing to make a return of income may lead to penalties being levied in addition to interest charges for late payment of tax.