I’ve begun trading quite a lot using eBay and Paypal, and have started to wonder about tax implications. Do any readers have similar concerns?

There’s no doubting the addictive properties of eBay: thousands upon thousands of people seduced by the thrill of the auction into buying items that they didn’t particularly want in the first place. The tie-up between eBay and Paypal, the online payment system, has led to large numbers of eBay transactions taking place in an internet bubble, completely separate from the “real” world of cheques and bank transfers. “It doesn’t seem like proper money,” writes Rich Lockwood. “I never withdraw Paypal cash to my bank account, so it’s a separate fund which I just use for buying things online.”

A huge amount of money is shunted via Paypal– some $8.7bn so far and growing by 37% a year – but most correspondents aren’t worried about their personal tax implications. “I love using eBay and Paypal,” writes Rosie Gilchrist, “but I don’t make a profit, and it just feels like I’m in an enormous car-boot sale.” Unless Paypal funds can, one day, be used at the supermarket or to pay your mortgage, Rosie’s experience of eBay and Paypal will be typical – just people selling their old stuff in order to buy someone else’s old stuff. But, as Carmel Swann points out, “the received wisdom on the eBay discussion forums is that tax authorities do keep an eye on eBay to spot any undisclosed trading.” So how do you know whether you’ve made the step from cyber-boot-sale addict to taxable trader? If the profits are pouring in then it’s probably obvious, but the full list of conditions are known as the “badges of trade”, which are listed in full on the HMRC website, or can be seen at tinyurl.com/eo58k. Patrick O’Brien from HMRC warns that the internet is no different to the real world when it comes to tax: “If someone is regularly selling items on the internet – or anywhere, for that matter – they could be acting as a business and may have a responsibility to register with us.¬”

So it’s up to you to monitor your own eBay activity, and speak to your tax office before they want to speak to you. Paypal’s Cristina De Parres: “Although we leave matters of tax up to the individual, if the authorities came to us and wanted to investigate a particular account, we would be obliged to hand over the information.” And you certainly wouldn’t want to incur the wrath of reader Gerald Haigh, who urges you to go legit. “Because people like me, who declare every penny they earn, will get astonishingly miffed if you don’t.”