Trading online without tripping on tax

||

There are few modern companies that do not use the Internet in some form, and online transactions make up a large proportion of most companies’ income. While the web has unquestionably given businesses – particularly those in retail – a whole new channel for custom, some analysts argue that virtual businesses are operating with too few restrictions as opposed to those with a physical presence.

In America, this was addressed last year with the introduction of an online sales tax, with the Senate voting 69-27 in favour of introducing higher tax rates for those companies selling online. In the UK, such a tax was ruled out by the Treasury in August 2013 amid concerns that it would hurt small businesses and lower income consumers. As the quandaries of cyber-based versus bricks-and-mortar businesses continue to be discussed, though, it’s an issue likely to return to the table at some point.

On the whole, trading online should be undertaken with the same professional approach as traditional sales, but there are a few points worth taking into consideration:

Remember the taxman

We’re so immersed in such a culture of buying and selling on sites like eBay and Amazon, that it’s easy to forget what constitutes ‘trading’.

HMRC’s website is rather hazy on what the term means. It advises that selling “occasional, unwanted personal items” online is not something that you need to consult the taxman on, but making money on anything bought specifically for resale is, along with anything self-made or any service you offer for profit.

If yours is the sort of business that only makes the occasional online sale, we still advise staying on the safe side and consult HMRC or reputable management accountants for professional advice.

Ease of payment

One common mistake made by companies is to concentrate too hard on the aesthetics of their sites, and not hard enough on the mechanics – particularly with regards to payment. Make sure transactions are user friendly, can accommodate a range of payment methods and ideally accept foreign currencies. It’s also worth considering whether transactions can be completed just as easily via mobile devices as they can via desktops.

Indeed, the rise of mobile internet is ushering in a whole new dimension of e-business, and this will no doubt continue to be scrutinised by the Government and HMRC. To free up the time you need to explore every channel of your company, consider the benefits an outsourced accounting solution could bring in terms of both maximising hours and minimising expenditure.