At the risk of stoking this fire, I’d like to proffer my opinion. In addition, it’s possible I may be wrong about some of this, so please correct me if that’s the case. Another disclaimer: I’m not saying that any of this necessarily pertains to the OP; it’s more Food for Thought going forward, and perhaps even a point for discussion (although as was alluded to earlier, it’s been discussed to death).
“Goods & Services” payments protects buyers, but not so much sellers. Even if sellers attempt to protect themselves with photographs, tracking numbers, etc., an unscrupulous buyer could nonetheless say that the received item is the wrong item, or broken, or the box contained bricks, etc., and in that case, the buyer’s $ would be refunded and the buyer is not obligated to return the item, the result being that the seller is screwed, and the "buyer" got the item for free.
By contrast, “Friends & Family” payments do not pose any risk to the seller.
In addition, here in the USA, there are tax ramifications to using “Goods & Services”, and I suspect the situation in the UK is similar. Here’s some info about that from Paypal:
https://www.paypal.com/us/webapps/mpp/irs6050w
Internal Revenue Code (IRC) Section 6050W states that all US payment processors, including PayPal, are required by the Internal Revenue Service (IRS) to provide information to the IRS about certain customers who receive payments for the sale of goods or services through PayPal.
PayPal is required to report gross payments received for sellers who receive over $20,000 in gross payment volume AND over 200 separate payments in a calendar year. In order to help you understand these information reporting obligations, we have prepared the following FAQs. After reviewing the following FAQs, we recommend you consult your tax advisor to assess tax implications of Form 1099-K reporting.
How is the $20,000 calculated? Will it be calculated based on net or gross transaction earnings?
As required by the rules, the $20,000 will be calculated by looking at a seller’s gross payment volume for sales of goods or services. Gross amount means that any adjustments for credits, cash equivalents, discounts, fees, refunded amounts or any other amounts will not be netted out.
In addition, the reported amount will include any shipping and handling, sales tax or other fees which are included in payments you receive. We realize that these amounts may or may not be included in your taxable income, but we are required to report them. You should work with your tax advisor to determine how these items should be treated for tax purposes.
Are personal payments that I receive counted in the total that will be reported to the IRS?
No. Personal payments that are not payments for the sale of goods or services will not be counted when determining if the IRS thresholds have been reached and will not be included on your Form 1099-K if you exceed the thresholds. However, all payments received for the sale of goods or services will be used to calculate the gross payment volume to be reported. PayPal monitors accounts to ensure that personal payments are not being used for sales of goods and services.
Although “
PayPal monitors accounts to ensure that personal payments are not being used for sales of goods and services”, it might be hard for Paypal to prove exactly what a particular payment is for. On the other hand, the burden of proof may lie with the Paypal account holder to explain the high frequency of odd-numbered monetary amounts of a vast number of “Friends & Family” payments. The tax-levying authorities may not necessarily believe that we’re all loving, trusting, embracing members of the “Retrobike Friends & Family Collective”, given that most of us have never even seen one another face-to-face, and they may just deem ALL of our transactions as payments for Goods & Services, i.e., taxable payments.
That’s just my long-winded 2 cents worth.
As you were, gents.
Smoke 'em if ya got 'em.
