Taxman turns his sights to online auction sites

First it was plumbers, doctors and restaurateurs, now it's eBay traders.

HMRC announced last week that it would be targeting "tax cheats" who were buying and selling items for profit on the popular auction site. This follows a similar series of crackdowns in other areas of the economy. The campaign will see HMRC use the very latest in technology, including "web robot" software that will search the web to pinpoint people who are trading, and who have not told HMRC and have failed to pay the right tax. "HMRC is seeking those who make a living from online trading and those who supplement their income through significant trading activity. The majority of eBay traders will be unaffected," said Mark Herson, a director in the private client tax team at James Cowper, an accountancy firm. He added: "I would always recommend that individuals who believe they owe tax take advantage of opportunities [such as this announcement] to bring their tax affairs up to date."

People are deemed to be trading on eBay and therefore liable for tax if they sell goods they have specifically bought for resale, sell items they have made themselves or buy and sell items on someone else's behalf for payment.