Would You Become a Part-time Dealer?

[lmwstamps]

In the interest of full disclosure, my primary purpose in stacking is for pension purposes and wealth preservation.  Being in my 40's, I anticipate that there are at least 25 more years ahead of me before I need to use my stack for it's intended purpose.  More and more, though, I am beginning to consider that one of the best ways to dispose of it when the time comes is to become a part-time dealer.  This seems to have the benefit of maximizing the proceeds of selling by cutting out the middle-man and of potentially transforming something of a hobby into a revenue source in my later years.  I find that this idea in particular impacts purchasing habits in the present in terms of what I chose to buy.  Has anyone else thought along these lines?  If so, is there any advice or pitfalls to consider?

[matrawr]

I myself am seeking advice/help in this area.....not sure if to go P/T or F/T though!

[Tingles]

I think security should be a big consideration 

[MickD]

I've thought about it, particularly potential income tax implications.  Don't find the available guidance particularly clear.  I'm familiar with HMRC badges of trade but not sure how/when it would kick in in practice, same applies to selling off numismatic doubles/coins where I have a better grade or restructuring stack.  All a bit of a headache that gets put to one side for another day.

[MickD]

I'm often tempted to sell some items on eBay or the Silver Forum but never quite get round to it.

[matrawr]

@Tingles Security is easily done with some cash and common sense.

Yes @MickD that's going to be one of my major concerns if I choose to go the registered business route!

[watchesandwhisky]

I think its doable but will take some investment getting a functional website up and ongoing SEO costs. The big boys have the lions share of the market in a game that's already very low margins. 

Do you think you can beat their prices? in a fairly significant way to warrant using a unknown (at first) dealer.

 

[matrawr]

@Madstacks in your opinion what would be an ideal investment and do you mean in cash or in ounces?

I'm going through the accumulating of my collection/stack I think that taking advantage of offers/nectar points is important.

[Goldhooked]

17 minutes ago, lmwstamps said:

More and more, though, I am beginning to consider that one of the best ways to dispose of it when the time comes is to become a part-time dealer.  This seems to have the benefit of maximizing the proceeds of selling by cutting out the middle-man

You don't need to use a middle man to dispose of your precious metals.  Just sell them on the forum or eBay as a private seller.  That will maximise your profits without starting a business.

At the point that you start buying something with the sole intention of selling to make a profit then technically you are a business.   

A few things to think about....

- Where do HMRC draw the line between buying precious metals as a personal investment to sell later and a business buying/selling for profit?
- If you run the business as a sole trader can you still use your capital gains allowance?
- If you run the business as a Limited Company then your profits will be subject to corporation tax.
- VAT implications if your turnover grows large enough.

[watchesandwhisky]

4 minutes ago, matrawr said:

@Madstacks in your opinion what would be an ideal investment and do you mean in cash or in ounces?

I'm going through the accumulating of my collection/stack I think that taking advantage of offers/nectar points is important.

I was thinking mainly about cash costs for web design and search engine optimization - but I guess that's more of a main time job.

Yep nectar points and 20% of ebay vouchers should always be used when possible!:) I play it safe and only use the vouchers with the bullionbypost ebay account.

[lmwstamps]

Since every 

3 minutes ago, Madstacks said:

I think its doable but will take some investment getting a functional website up and ongoing SEO costs. The big boys like have the lions share of the market in a game thats already very low margins. 

Do you think you can beat their prices? 

 

Since every PM market is driven by local trends, I can't answer for the UK, but I would ask a question in return.  Is the only option in the UK to sell online?  Are there no shows, no open air markets, no places for small businesses to sell person to person?  For me, I can answer the questions and suppositions in the following way:  1) I could realistically beat the big boys in setting up a functional website and SEO costs.  By trade I'm a computer programmer and have developed websites before so it would mostly be a matter of time on my part.  2)  Could I beat the big boys on prices?  For many items, yes, for newer bulk bullion, probably not.  With that said, I have no intention of competing with the big boys or of making online my primary selling venue.  I get better deals when buying in person and can offer better deals when selling in person so that would be my primary business model.

[matrawr]

8 minutes ago, Goldhooked said:

You don't need to use a middle man to dispose of your precious metals.  Just sell them on the forum or eBay as a private seller.  That will maximise your profits without starting a business.

At the point that you start buying something with the sole intention of selling to make a profit then technically you are a business.   

A few things to think about....

- Where do HMRC draw the line between buying precious metals as a personal investment to sell later and a business buying/selling for profit?
- If you run the business as a sole trader can you still use your capital gains allowance?
- If you run the business as a Limited Company then your profits will be subject to corporation tax.
- VAT implications if your turnover grows large enough.

Even as a private seller would you be required at any point to notify HMRC?

[MickD]

That's when the badges of trade kick in I think.

[Goldhooked]

Just now, matrawr said:

Even as a private seller would you be required at any point to notify HMRC?

If you exceeded your capital gains limit in any profit you made you would have to inform them.  But saying that, you would need to sell a hell of a lot of PMs to go over your limit and some coins are CGT exempt in the UK anyway (all British legal currency, Britannias, sovs, etc).

[lmwstamps]

7 minutes ago, Goldhooked said:

You don't need to use a middle man to dispose of your precious metals.  Just sell them on the forum or eBay as a private seller.  That will maximise your profits without starting a business.

At the point that you start buying something with the sole intention of selling to make a profit then technically you are a business.   

A few things to think about....

- Where do HMRC draw the line between buying precious metals as a personal investment to sell later and a business buying/selling for profit?
- If you run the business as a sole trader can you still use your capital gains allowance?
- If you run the business as a Limited Company then your profits will be subject to corporation tax.
- VAT implications if your turnover grows large enough.

Those things are definitely considerations for those in the UK.  Living in the US, I don't know what HMRC is a VAT is currently not a factor.  In the US, I would file taxes as a Sole Proprietor along with my personal taxes.  Capital gains would not be a factor and taxes would be based on profits.  Any expenses (coin purchases, supplies, fees, etc) used for the business would be mostly 100% deductible and removed from the gross income.  The net income would be taxed at the same rate as personal income and based on a sliding scale of total income.  That's how it currently works in the US, but who knows 25 years from now.  As an aside, I do currently sell on eBay as a private seller but that certainly doesn't maximize my profits.  Yesterday I sold a coin on eBay for $45.  My gross profit was a little over $36 after subtracting out fees, shipping, etc.  Yesterday, coincidentally, I also sold coin for $45 at at local coin club auction.  My gross profit after subtracting fees, shipping, etc was $45.  eBay is very much a middle-man.

[MickD]

Google HMRC badges of trade, you'll see why it gives me a headache.

[matrawr]

6 minutes ago, MickD said:

That's when the badges of trade kick in I think.

Badges of trade?

 

[MickD]

Sorry, thought you were UK based.

[MickD]

HMRC badges of trade are what the tax man uses to determine if you have trading income.

[JunkBond]

2 minutes ago, matrawr said:

Badges of trade?

 

https://www.gov.uk/hmrc-internal-manuals/business-income-manual/bim20205

[watchesandwhisky]

25 minutes ago, lmwstamps said:

Since every 

Since every PM market is driven by local trends, I can't answer for the UK, but I would ask a question in return.  Is the only option in the UK to sell online?  Are there no shows, no open air markets, no places for small businesses to sell person to person?  

Yep absolutely, we have flea markets, antique fairs and carboot sales - its possible to buy sell and trade silver at all of these - And i have done so to a fair extent. The problem is with selling this way is all of these cost the dealer extra expenses in travel, stall costs and time - So in my experience as a seller I have to charge more than if i was to sell here or its just not viable, here I can sell from the comfort of my arm chair and as such can sell cheaper. 

On the flipside I find it also hard to buy from these type places when I know damn well i can get it cheaper here or online in 90% of cases! 

As you have the relevant skills for the computer/website side of things that is a massive advantage for sure! 

25 minutes ago, lmwstamps said:

I get better deals when buying in person and can offer better deals when selling in person so that would be my primary business model.

If you feel you can buy enough cheap enough  - and sell enough with enough of a margin to cover you expenses and time and be worth it then its a nice way to earn a few quid. 

58 minutes ago, lmwstamps said:

Has anyone else thought along these lines?  If so, is there any advice or pitfalls to consider?

My advice would be go to local shows/markets/trade fairs regularly and get to know your competitors and other dealers so when buying you know who to bypass  - as they are too expensive. When i go to a big show that has many hundreds of stalls i buy from maybe 4 or 5 and i know where they are so can locate them fast and early.

Seems to be two types of traders at such fairs, those who buy and try and sell for huge markups to the public at top market value, and those who sell cheap and source cheaper who mainly sell in bulk to the trade first thing - they are few and far between but the only viable place to get stock most times. This will help you source more stock.

[MickD]

If you do have trading income in the UK in any financial year, you then have to complete a self assessment form, which I can do without.

[JunkBond]

5 minutes ago, MickD said:

If you do have trading income in the UK in any financial year, you then have to complete a self assessment form, which I can do without.

And if you get an accountant to do it then that's another expense.

[Goldhooked]

2 minutes ago, lmwstamps said:

Those things are definitely considerations for those in the UK.  Living in the US, I don't know what HMRC is a VAT is currently not a factor.  In the US, I would file taxes as a Sole Proprietor along with my personal taxes.  Capital gains would not be a factor and taxes would be based on profits.  Any expenses (coin purchases, supplies, fees, etc) used for the business would be mostly 100% deductible and removed from the gross income.  The net income would be taxed at the same rate as personal income and based on a sliding scale of total income.  That's how it currently works in the US, but who knows 25 years from now.  As an aside, I do currently sell on eBay as a private seller but that certainly doesn't maximize my profits.  Yesterday I sold a coin on eBay for $45.  My gross profit was a little over $36 after subtracting out fees, shipping, etc.  Yesterday, coincidentally, I also sold coin for $45 at at local coin club auction.  My gross profit after subtracting fees, shipping, etc was $45.  eBay is very much a middle-man.

Sorry, I didn't realise you were US based when I posted.  The HMRC and VAT stuff is more relevant to @matrawr

Its a bit different with PM's on eBay in the UK.  People regularly overpay for bullion on there.  Even after fees, you can often make more on eBay selling at silly high prices than selling at sensible prices on the forum.

I don't think the face-to-face selling oppurtunities are that good in the UK.  High streets are dying with shops closing all over the place as people prefer to shop online.  There are coin shows but they tend to be bigger affairs in larger cities like London and not very often.

I run my own business (not PM's) and a large part of sales are through eBay.  We used to do fairs and markets but it was a waste of time even getting up in the morning!  Online platforms like eBay and Amazon take their cut in fees but they literally open the world up and put our products in front of millions of potential customers.  I run the business from a shop but only use it as an office and warehouse - we get about 2 customers a year asking if they can come to the premises to collect!  If I ran it as just the shop without eBay and Amazon, we would have gone out of business years ago.  Whether this would be the same with precious metals, I don't for sure but I suspect so.

[watchesandwhisky]

7 minutes ago, MickD said:

If you do have trading income in the UK in any financial year, you then have to complete a self assessment form, which I can do without.

My accountant costs £250 per year, to be fair i do most of the work and just submit him the figures.