eBay seller jailed for tax dodging
Gregory Allnutt from Croydon in South London avoided paying more than £420,000 in VAT on electrical goods he sold on the auction site.
The father of one earned £4,000 a month over three years selling cut-price electrical goods sourced from the European Union, according to the Daily Mail.
The 40-year-old set up a company called Shapewise to sell nutrition products from the comfort of his home. But instead he bought tax-free electrical goods through online site Pixmania before selling them without VAT in order to undercut the competition.
Allnutt did not realise he was obliged to pay VAT on the goods he sold, the court was told. He also to filed 'nil' accounts between 2007 and 2010, falsely stating he had earned no money.
But he was informed by his accountant at a meeting in 2007 that he owed £67,000. Instead of turning himself in, he continued with the scam until December 2010 when he was caught by HM Revenue & Customs.
Prosecutor David Hewitt said: "It wasn't until 2007 that he realised he wasn't paying it properly. At that point he was in too deep and he realised he was stuck. He realised if he charged VAT he wasn't able to compete.
"He did try it legitimately but he couldn't make the system work because he couldn't make enough money."
Allnutt admitted 12 counts of fraudulent evasion and was sentenced to 20 months in prison.
While big money earnings like Allnutt's have obvious tax implications, many smaller scale traders may not be aware that they are obliged to declare earnings to the taxman.
The profits from selling on eBay entered a grey area when consumers started using it for more than getting rid of a few unwanted items from clearing out the loft. The position on declaring your earnings for tax purposes comes down to whether you are a trader or private seller.
Under HMRC guidance, you are a trader if:
• you purchase goods specifically for the purpose of reselling them
• you make items with the intention of selling them for profit
• you are buying or selling goods on behalf of others for financial gain
• you are providing a service and are receiving payment
If you fall into category, you are trader in the eyes of the taxman and should register as self-employed with HMRC. The current tax-free allowance is £6,475 – rising to £7,475 for the 2011/2012 tax year – which means if you earn less than this you won't pay tax – but it is still important to register.
Private sellers are classed as those who sell occasional, unwanted personal items through internet auctions or classified advertisements, or attend a car boot sale once a year to sell unwanted household items.