WITH the Olympic torch having recently passed through our region, the issue of tax would not appear to be of immediate relevance.

However, as some of these torches are being offered for sale on e-Bay with bids mounting to tens of thousands of pounds, I thought I would look at the tax implications of e-marketplace trading.

Just selling some personal belongings such as unwanted books, CDs, toys, household items or the odd Olympic torch would not be regarded as carrying on a trade.

Consequently, the sums received from such sales would not be liable to income tax and as long as the proceeds from the sale of each item or collection of items did not exceed £6,000 there will be no Capital Gains Tax (CGT) implications either.

If an item is sold for more than £6,000 then CGT may be due depending on whether you have other gains in the tax year. Tax is charged on gains at either 18% or 28% depending on whether an individual’s income and gains fall wholly within or beyond the basic rate band.

There is no exemption from CGT if an individual donates all or part of the sale proceeds to charity, although higher rate tax payers may be able to mitigate their tax bill through the Gift Aid scheme. No charge to CGT would arise if personal possessions or an Olympic torch are given to charity for them to keep or sell.

So, when does this kind of activity amount to a trade? Commonly, a trade would exist where an individual undertakes their activity with the intention of making a profit, where goods are either bought or made and then sold on a regular basis.

For instance, where an individual who makes greetings cards and occasionally sells them to work colleagues and friends for an amount to cover cost and sometimes at a loss, their activity would normally be treated as a hobby rather than a trade. But if sales were made on a regular basis for profit and the money was used to buy further supplies for re-sale a trade is being undertaken.

In such circumstances, an individual would be treated as self-employed and any profits made would then be liable to income tax and national insurance contributions. If the turnover from this activity in a 12 month period was sufficiently high then the individual may also need to register for VAT. The current VAT registration annual threshold is £77,000.

From the date trading starts you have three months to notify HM Revenue & Customs that you are trading and for income tax and CGT purposes, you have until October 5 following the end of the tax year to tell HMRC that you are liable to tax. For a trade starting in 2011/12, the deadline is October 5, 2012.

With the Revenue trawling the internet to catch those with untaxed profits from e-trading and the sale of Olympic torches, financial penalties for failure to disclose such profits could become a burning issue.