As from January 2025 online selling platforms (eg Vinted, Deliveroo, eBay etc) will have to provide HMRC with information about the income of their sellers.
The Low Incomes tax Reform Group (LITRG) warns that HMRC has failed to do enough to make sellers aware
of the fact they may need to file a tax return and pay tax on their
online trading income.
Although there is no change to existing tax
rules, HMRC will have more information on who is earning income using
online platforms and therefore may be more likely to find out who owes
tax on their earnings.
Online Platforms – the changing landscape for the self-employed, argues that the new reporting rules – which caused widespread confusion when they took effect from January 2024
and fuelled the misconception that a new ‘side-hustle’ tax had been
introduced – could cause chaos for taxpayers when the first reports are
sent to HMRC and sellers in the New Year.
LITRG’s concerns include:
- Sellers receiving information on their activities from platforms
based on a calendar year of activity, not by tax year, making it harder
to understand and calculate when tax may be due.
- The lack of a standard reporting format, meaning sellers could receive different forms from different online platforms.
- Reports being produced during one of HMRC’s busiest times of the
year, when it can be hardest to access help. LITRG is concerned that
sellers could ignore the information, creating problems further down the
line.
According to HMRC’s own impact assessment, up to 5 million
‘businesses who provide their services via digital platforms’ –
including the self-employed – could be affected by these new reporting
rules.
LITRG is calling on HMRC to strengthen its guidance for those using
online platforms. It wants to see the information HMRC and sellers
receive standardised across platforms so users can easily understand it
and report their earnings by tax year.
LITRG is also concerned that the exercise will uncover widespread
non-compliance, especially when the reports are fully rolled out. LITRG
argues that HMRC should take a ‘measured’ approach towards dealing with
instances of non-compliance. While such problems may be widespread, the
actual amounts of tax due may be small and in some cases, uneconomical
to recover.
Claire Thackaberry, LITRG Technical Officer, said:
“There are just over three months to go until HMRC starts getting
information about the income and activities of people who use online
platforms to make money. We are concerned that we will see the same
chaos and confusion that arose when the rules first came into effect.
Time is running out for HMRC to defuse this ticking time bomb.
The information that HMRC will receive from platforms will be
presented by calendar year, therefore covering more than one tax year.
This could make it more difficult to work out when tax is due. Many
people will turn to HMRC for help. However, January is an extremely busy
time for HMRC ahead of the self-assessment tax return deadline and this
will make it harder to speak with someone.
Our concern is that people will either do nothing with the
information they have been given or use it incorrectly, storing up
problems for the future. HMRC needs to work with platforms and sellers
to make this information as clear and easy to digest as possible so that
people can comply with their tax responsibilities.
It is in no one’s interest for sellers to be non-compliant. Failing
to pay the tax that is due threatens livelihoods and can impact HMRC’s
‘tax gap’, which is the difference between the amount HMRC expects to
raise and the amount it actually gets.”
I predict chaos!
Tax does have to be taxing.
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