When is a private seller a trader?

[ZiggyNiva]

I'm sure this has been covered before, so apologies in advance but at what point does someone who has sold a number of cars become a trader?

No reason for the question other than curiosity based on a seller I have come across. In the last 4 months he has sold at least 7 cars. Most of which I have found he bought on ebay less than a month before he sold them (presumably he just waits for the V5 to come back) for substantially less then he is selling them for.

He is obviously welcome to make as much profit as he wants and fair play to him (and if I had seen some of the cars on ebay he has bought I would probably have considered doing the same), but is there a point at which questions should be asked about SOGA and Income Tax etc?

So are there guidelines around what makes a private seller a private seller? Would some one need to be selling multiple cars at once to be classed as a dealer? Do you have to be making x amount a year from the sales?

As I said this is solely out of curiosity, and thought where better to ask then here? I'm not going to post a link to the seller as I am sure there are hundreds of people do the same, and i'm not just going to pick on one.

Before any one asks its not me.

[Du1point8]

I would assume its as soon as the person is selling on for profit and its not a personal car they use?

If you bought a car, used it for 3 months, then sold for profit, bought another did the same again, then I suspect this would be almost non trading as its your personal transport, but its a very grey area.

The example you give is just a trader hoping not to be found out Im assuming they are not giving the same security as a normal trader like a warranty, etc?

[ZiggyNiva]

Du1point8 said:

I would assume its as soon as the person is selling on for profit and its not a personal car they use?

If you bought a car, used it for 3 months, then sold for profit, bought another did the same again, then I suspect this would be almost non trading as its your personal transport, but its a very grey area.

The example you give is just a trader hoping not to be found out Im assuming they are not giving the same security as a normal trader like a warranty, etc?

Nope no warranty, and on a couple of occasions not mentioning faults in the original adverts (I know he may well have fixed them)

[jammy_basturd]

Probably at the point at which one of his "customers" isn't happy with their purchase, realises what he's doing and threatens to shop him in to HMRC unless they get a refund or problems rectified.

[N88]

If he's buying and selling the cars with the intention of making a profit, then it's a business and HMRC should be notified.

[akirk]

N88 said:

If he's buying and selling the cars with the intention of making a profit, then it's a business and HMRC should be notified.

^^this, it is intention not quantity
difficult for HMRC to prove intent with only one purchase, so one element of proof is more cars than might be expected to be normal in a period of time...
so someone buying a couple in a year is a hobbiest at most - someone buying 7 in xx months is a different issue...

[Simpo Two]

N88 said:

If he's buying and selling the cars with the intention of making a profit, then it's a business and HMRC should be notified.

And Trading Standards if he's masquerading as a private seller.

[Eric Mc]

HMRC has a simple definition of trading. Essentially they say, anybody who buys goods with a view to reselling them at a profit, is trading. That applies to any product, whether it be apples, oranges or cars.

[ZiggyNiva]

Eric Mc said:

HMRC has a simple definition of trading. Essentially they say, anybody who buys goods with a view to reselling them at a profit, is trading. That applies to any product, whether it be apples, oranges or cars.

OK. That definition is very interesting.

[jonamv8]

So if I buy a car at a good price, use it for a couple of months, decide I need something else, ie my 2 seat sports car is not practical so want a 4x4, look at market, can see I can get more for it, am I inclined to sell it as a loss not to fall foul of being labelled a trader??

Edited by jonamv8 on Monday 20th April 22:14

[jammy_basturd]

If you buy it with the intention of keeping it then you are not a trader.

If you keep changing your mind, or your circumstances change, every couple of months, well, HMRC can't say much about that.

Obviously if the volume increases or a pattern emerges you mind have a harder time convincing people that you bought with the intention of keeping.

[Eric Mc]

Absolutely. It's all about intentions and patterns. At the moment, HMRC can't read minds so "intention" is hard to prove. However, a person involved in a pattern of transactions of purchases and sales may indicate that a trading activity is being carried out - so HMRC MAY be alerted.

They do have teams that look at small ads, e-bay and car boot sales - but I would say that 90% of such activity never gets caught.

HMRC depends on people "Self Declaring" what they are up to - that is why the system is called "Self Assessment".

When Osborne announced that "Self Assessment" was to be abolished at some time in the future, I didn't exactly jump with joy because the legal framework behind Self Assessment may also be abolished and a much tougher "hands on" approach by HMRC may replace it.

You have been warned.