For some people, eBay is a convenient tool for getting rid of unwanted personal possessions, but many small businesses are utilising the site as their main eCommerce platform. So Do You Need an Accountant for an eBay Business?
As these businesses grow and have to deal with more sales, fees, and other expenses, they might find themselves overwhelmed by the accounting that needs recording – and will look at the benefits of hiring an accountant to help them manage their financial decisions, claim for the right reliefs and expenses, and to ensure their self-assessment tax returns are filled in correctly (and filed on time).
Understanding the Basics: What Needs to Be Accounted for on eBay and Do You Need an Accountant for an eBay Business?
If you’re trading on eBay as a business, then you must keep a careful record of all your sales and any income you’ve received from the platform (no matter how small).
It’s generally a good idea to keep personal private sales separate to your business account, but if you are going to use your shop to sell personal items, then you must record this as a separate entry on your accounts – because personal sales may not be taxable (depending on the volume) but may also incur capital gains tax.
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If HMRC to were review your eBay trading, they may look at:
- What items are being sold?
- What was the purpose of buying an item?
- Why was it sold?
- Have you been buying and selling similar or the same item/s before?
- How often do you buy and sell through eBay?
If the Tax Office believe that you’ve been buying and selling regularly, and there’s evidence that it’s not for personal usage (even if it’s just a hobby), they may decide that you’re operating a small business – and thus be required to register for self-assessment and pay any tax due on the income.
As with many business accounts, eBay accounting isn’t as simple as what you’ve spent (costs), what you’ve made (income), and what the end balance is (profit or loss) – there is also the issue of expenses, in this case, specifically the varying fees that are applied both by eBay and partner platforms such as PayPal or with the postage costs.
eBay fees are considered to be deductible expenses, so you can claim the cost of insertion fees, final valuation fees, etc against your income, which may potentially reduce your tax bill, so you need to know what you’re spending out on, how it should be recorded, and whether it’s an allowable expense.
Expenses Involved with Your eBay Businesses: What Do You Need to Know?
Allowable expenses are generally those costs that are essential for your business to run, and can be deducted from your taxable income, to reduce your tax liability. It’s important to remember that if you’re making a personal purchase or spending on something that isn’t related to the business, that the amount cannot be claimed as an allowable expense.
When your business is operating on eBay some of the allowable expenses will include listing fees, final valuation fees, extra image costs, and postage costs.
There are other expenses that will be associated with running your small business on eBay, that you should also be aware of, including those relating to:
- Marketing and Advertising
- Bank and processing fees
- Software
- Post and packaging materials
- Internet connection
- Travel expenses
- Insurance
- Professional Services
When doing your accounts, HMRC requires records to be clear, understandable, and kept for a certain amount of time – which means you need to keep a ‘paper-trail’ (even if it’s just a digital one) of invoices, receipts, payslips, and the assorted paperwork that comes from everyday business operations.
What Can an Accountant Do to Help with Your Professional Business Needs?
When you’re first starting out on eBay, you may not have regular or reliable amounts of sales coming in, and you might feel that you can handle your accounts alone – but as your company gets bigger, and you have more responsibilities and demands for your time, it doesn’t make sense to use your valuable time to struggle with something that a trained professional can handle with ease.
The right accountancy service will help you determine what records you need to keep (and how long you need to hold onto them), what expenses can be claimed against your taxable income, what reliefs or taxable benefits are available to help you make the most of your income, and perhaps most importantly for those pressed for time – can help you maintain your accounts in a format that makes sense, is clear and easy to understand, and is compatible with HMRC’s legal requirements.
Our team of experts are specialists in handling eBay operations and businesses, and we can help you keep your accounts up to date, on-time, and accessible. Contact us today for a consultation, and let’s see how we can make your business grow!
