Olympic Torch Sales to be Taxed.

Every little helps“. This is the marketing slogan of Tesco – British grocer and general merchandiser – and the third largest retailer in the world after Wal-Mart and Carrefour.

With net income last year of £2.6bn Tesco understands that even the smallest contributions help the bottom-line, especially in a recession.

Perhaps this is also the thinking of Her Majesty’s Revenue and Customs (HMRC) who has today issued guidance on the taxation of Olympic Torch sales.

This year’s Olympic Torch relay will span 70 days and cover 1,000 cities and towns in the U.K. According to the official Torch Relay website, for the 8,000 persons chosen to carry the Olympic ‘flame’ it will be a will be a “once-in-a-lifetime experience.”

No doubt keen to share this experience, a great many of the torch-bearers have already turned to E-Bay to offer the rest of us a “once in a life-time opportunity” to own an Olympic torch, with some going on sale even  before the first stage of the relay had been run.

In fact, since the Olympic flame reached England the distinctive gold torches, which cost £495 but were discounted to £215 for the runners who did not receive theirs free from corporate sponsors, have been at the centre of a series of online ‘bidding’ wars.

Punters have place ‘bids’ in excess of £5,000 for these mementos with some runners even throwing in their running gear to “sweeten the deal”.

As you might expect some have claimed to be motivated by benevolence and declared that the proceeds will be donated to charity.

Predictably, HMRC isn’t buying it!

Unless the torch is given to a charity for them to keep or sell themselves HMRC will levy a capital gains tax on the proceeds of the sale. Depending on the amount received the tax may still apply even if the torch-bearer donates the full proceeds to a charity through the Gift Aid system.

If the motivation behind the sale was other than altruistic and the torch is worth less than £6,000 when sold, the seller will not have to pay the capital gains tax. However, if the torches fetch more than £6,000 a ‘taxable’ event would occurred and the seller will be liable to taxation at 18% or 28% on the proceeds depending on the seller’s total income for the year.

HMRC has also reminded would-be torch-sellers that it might take the view that the sale ought to be considered a trade if the sale is part of a regular pattern of selling goods or services, in which case the seller could be liable to pay income tax rather than the capital gains tax.

Yes but can it be enforced?

With only 8,000 available for sale it is unlikely that Olympic torches will ever appear on Tesco shelves or any ‘brick-and-mortar’ retailer. It’s also equally unlikely that HMRC will ever know who is actually selling the torches as most of the sales will be executed online. That is unless the e-sellers step forward.

Little wonder then that within hours of issuing the guidance on the Olympic torch taxation HMRC also issued its final E-seller amnesty reminder.

The amnesty which runs out this year on June 14 operates under HMRC’s e-Markets Disclosure Facility and allows marketplace traders to approach the HMRC with their intention to take part in the scheme which offers an opportunity to get their tax affairs in order on the best terms available.

In some case cases penalties may not be applied or reduced to 10% of tax owed. Once the amnesty runs out then HMRC will start contacting online traders who failed to take advantage of the facility if they are believed to owe taxes. They could face penalties of up to 100% of the tax payable.

The Facility is part of HMRC’s ‘Grab the Cash’ Campaign which will employ state of the art technology such as ‘web robots’ to search the Internet and find focussed information about specific individuals and businesses. Working alongside its own computer systems the new software is supposed to accelerate and revolutionise HMRC’s identification of tax evasion.

In addition, according to Risk and Compliance officials at HMRC, the Facility is an adjunct to its established ‘whistle-blower’ programme that allows people to ‘tip-off’ HMRC when they believe an individual or business is evading taxes.

There might be only 8,000 authentic ‘Olympic Torches’ in circulation but I expect HMRC has done the maths and is determined to make even this little bit count.

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