Online traders warned after eBay seller jailed for tax fraud

North Wales based chartered accountants Pritchett & Co Limited are warning online traders that they must disclose their earnings to HMRC, following a recent prosecution of an eBay trader.

John Woolfenden from Manchester has been jailed for two years for evading £300,000 in tax following an HMRC investigation.

Woolfenden sold CDs, DVDs and console games via eBay and other auction sites such as Play.com and Playtrade using the name “Globalworldentertainments”, but never declared his self-employed status or sales for tax purposes.

When Woolfenden’s house was raided by HMRC in May 2013, officers found the house has been set-up as an online trading base, with boxes piled high in spare rooms and even the shower.

Forensic accountants from HMRC found that £1.3 million had passed through various bank accounts over a six year period. Some money had also been laundered through American bank accounts.

David Pritchett, director at Pritchett & Co Limited, said: “People operating online trading activities as pseudo-businesses should take this prosecution as a warning of the consequences of not declaring their income to the relevant tax authorities”.

“Individuals who sell things online to make a profit, and do so often or regularly, will be considered as ‘traders’ by HMRC, and will need to register with the tax authority for self-assessment”.

“HMRC is likely to start an investigation particularly if you register as a business seller on an internet auction site and do not declare your income to them”.

“By speaking to a trusted accountant online traders can get the advice they need to ensure they are tax compliant.”

Woolfenden was investigated as a result of HMRC’s e-Marketplaces campaign to tackle undeclared tax and income from online trading. While this closed in September 2012, the department says that it is continuing to use the data gathered during the campaign to identify people who should have come forward but did not do so.

For more information or help registering for self-assessment, please contact us at info@pritchettandco.co.uk or call us on 01492 534250.

The author is a director at Pritchett & Co Limited, Chartered Accountants and Chartered Tax Advisers, members of UK200Group with offices throughout the UK and Associates overseas.