Reporting Rules for Digital Platforms – Impact of HMRC consultation on the self-employed
The continued expansion and growth of the digital platforms market where individuals seek to promote and sell their goods and services remain under the watchful eye of the Government, with a view held, rightly or wrongly, that individuals using such platforms may not be paying the correct amount of tax.
Changes for the self-employed using digital platforms
For those self-employed individuals who use such platforms to procure work or obtain an income stream, they may be surprised to discover that, in the future, information regarding their income will be forwarded to HMRC.
The Government has opened a consultation regarding the implementation of the Organisation for Economic Co-operation and Development (OCED) Model Reporting Rules for Digital Platforms, which will require UK digital platforms to report information to HMRC regarding the income of individuals or companies (sellers) using their platforms.
The consultation sets out details of the OCED rules and the Government is seeking views on the UK’s proposed implementation of the rules, including the optional or discretionary elements. The consultation closes on 22 October 2021 and can be accessed through this link: Consultations: Reporting-rules-for-digital-platforms
After the consultation closes, a summary response will be published. The Government will then set out the requirements to the platforms under the UK rules and a further technical consultation on the draft regulations is expected to take place in 2022.
When are the changes due to take place?
The rules will come into force in January 2023 at the earliest and will not just apply to the UK. Digital platforms will need to submit reports to the tax authority where the platform is resident, incorporated or managed. The details will also be sent to the tax authority where the seller is resident, and the individual seller will also receive a copy.
HMRC consider that the new process will help sellers to declare the correct amount for tax purposes and will help HMRC to identify and tackle tax evasion and non-compliance of individuals using the digital platform market.
What details are required under the model rules?
Under the model rules, digital platforms which facilitate the selling of goods and services will be responsible for:
- Obtaining certain information regarding sellers, including details which identify the seller, their primary address, and their tax identification number.
- Providing the addresses of each property listed where the seller provides property rental services.
- Reporting the seller’s annual income to HMRC by 31st January each year.
- Providing details to the seller of the information used, which can be used by them to complete their relevant tax return.
To ensure that platforms comply with the reporting rules and provide accurate information by the required deadline, the Government plans to introduce a penalty regime for failing to comply with the rules or for submitting inaccurate returns.
Exemption for occasional sellers
Occasional sellers, who make less than 30 sales during the reportable period (a year) totalling not more than €2,000, will not be required to be reported by the platform to HMRC.
How the rules changes impact the self-employed
HMRC will now be privy to information that will enable them to check if an individual has declared the correct level of income for tax purposes or is, in fact, even registered under the self-assessment regime.
Where discrepancies are identified, this will undoubtably result in HMRC opening an enquiry into the individual’s tax return.
It is imperative that individuals using the digital platform arena are aware of their tax obligations and ensure that they are tax compliant to reduce any potential exposure to an HMRC enquiry.
These upcoming changes are a further indication that HMRC remain focused on the self-employed arena and will continue to monitor the labour market on an ongoing basis.
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