Ebay selling and fees

[snappyfish]

Hi, just wondered if someone could help me clear this up...

I sell an item on eBay for £100 eBay take a fee of say £20 leaving me a profit of £80

I'm self employed using cash basis account no vat.

1) Do I record just the £80 income on my books
or
2) I record first the sale £100 less fee - £20 then shows me £80 profit.

Thank you.

 

[japancool]

How much did you buy the item for?

 

[snappyfish]

How much did you buy the item for?

That's not relevant. I no I need to record item cost price. I'm just talking about my exact post information only.

 

[StevensOnln1]

You've made a sale of £100. The £20 eBay fee goes down as an expense. The total profit will be the same but you're understating your income if you don't record the total amount the item was sold for.

 

[snappyfish]

yes profit it the same.. But recorded turnover will be different?

If I don't record it as £100 sale less £20 profit the turn over I report is different? And is turnover important for HMRC or actual profit received? as surely it would push my close to being VAT registered.. so my point was as per question what's legal required?

 

[StevensOnln1]

You're required to report your entire turnover. If you don't and get close to the VAT registration threshold you may end up not registering when you should do, which would likely result in you being hit with a penalty on top of the VAT you should have paid if HMRC see that you've been deliberately under reporting your turnover.

 

[snappyfish]

You're required to report your entire turnover. If you don't and get close to the VAT registration threshold you may end up not registering when you should do, which would likely result in you being hit with a penalty on top of the VAT you should have paid if HMRC see that you've been deliberately under reporting your turnover.

Yes this it what I do, record detailed transaction. I had a friend who said to me he just records the £80 profit on books as he stated" he didn't receive £100 from eBay just £80 if this makes sense?

 

[StevensOnln1]

eBay are just processing the payment for you and deducting their fee before paying you the balance. The £100 is still your sale and the eBay fee is still your expense, your friend is under reporting their turnover.

 

[Rob-Ed]

Agreed, you should be accounting for the full income of £100 and the outgoings of £20. Things become much simpler if you apply the same rules for all income and outgoings.

 

[paulears]

Absolutely the correct thing to do is record what the customer pays - this would be the amount you would put on their receipt, if they asked for one (some do). At some point you will also bump into ebay managed payments - where they lump all your payments togethe r and then still add certain fees.

For turnover, it's the total income which is in your example, the £100 as the transaction amount. You've been correctly advised that the fees deducted are the cost of doing business. With ebay, you can easily hit the VAT ceiling without noticing as you have your cost price, the fees all reducing your profit - so you seem to earn quite a modest amount, but your turnover is high. Getting this wrong can hurt!

 

[Daybooks]

yes profit it the same.. But recorded turnover will be different?

If I don't record it as £100 sale less £20 profit the turn over I report is different? And is turnover important for HMRC or actual profit received? as surely it would push my close to being VAT registered.. so my point was as per question what's legal required?

You are required to follow the appropriate accounting standards where legally required (e.g. companies or charities) which require you not to net off. For sole traders the requirement is to report your profit on your self assessment tax return (SA103F) where turnover must be shown before deduction of expenses.

 

[MBE2017]

Just for clarification, in case any was needed, eBay will pass all your true records onto HMRC on request, they get asked for loads of information and they do not try to be awkward in the slightest.

So, as recommended, do it correctly and sleep better because of it.

 

[MyAccountantOnline]

Hi, just wondered if someone could help me clear this up...

I sell an item on eBay for £100 eBay take a fee of say £20 leaving me a profit of £80

I'm self employed using cash basis account no vat.

1) Do I record just the £80 income on my books
or
2) I record first the sale £100 less fee - £20 then shows me £80 profit.

Thank you.

As others have said its (2)

I see you mention 'no VAT' but it's particularly important when looking at turnover to see if you need to register for VAT that your records do show the actual sales.

 

[snappyfish]

Absolutely the correct thing to do is record what the customer pays - this would be the amount you would put on their receipt, if they asked for one (some do). At some point you will also bump into ebay managed payments - where they lump all your payments togethe r and then still add certain fees.

For turnover, it's the total income which is in your example, the £100 as the transaction amount. You've been correctly advised that the fees deducted are the cost of doing business. With ebay, you can easily hit the VAT ceiling without noticing as you have your cost price, the fees all reducing your profit - so you seem to earn quite a modest amount, but your turnover is high. Getting this wrong can hurt!

Yes agreed, had a friend who runs a similar business to me and he's not recording turnover just profit.

You are required to follow the appropriate accounting standards where legally required (e.g. companies or charities) which require you not to net off. For sole traders the requirement is to report your profit on your self assessment tax return (SA103F) where turnover must be shown before deduction of expenses.

Yes thanks.

Just for clarification, in case any was needed, eBay will pass all your true records onto HMRC on request, they get asked for loads of information and they do not try to be awkward in the slightest.

So, as recommended, do it correctly and sleep better because of it.

Yes I do. Thank you for clarification.