Digital marketplaces to report sellers’ incomes

Digital marketplaces to report sellers’ incomes

HMRC has confirmed that the UK will be adopting new reporting rules for digital platforms. This means that websites and apps such as Amazon, Airbnb, Deliveroo, eBay and Uber will have to report the incomes of sellers of goods as well as personal services, potentially from as early as January 2023.

Still under consultation by HMRC until 22 October 2021, the idea was first put forward by the Organisation for Economic Co-operation and Development (OECD) who proposed new rules setting out how digital platforms should collect information about the income of sellers and report it to the tax authorities.

Under the proposals, these online marketplaces will pass on the personal details and income transactions of sellers using their websites or apps to the tax authority where the seller or provider of the service is resident, so for UK-based platforms this will be HMRC. They will report sellers’ income arising in the previous calendar year to HMRC and the reporting deadline will be 31 January of the year following the calendar year.

HMRC stated that the new rules will improve international co-operation in regard to the exchange of information for tax purposes. They will also allow HMRC to access data from platforms based outside the UK quickly and efficiently, which should encourage compliance and increase the visibility of transactions.

HMRC also said that the rules are to help taxpayers to get their tax right and assist them in detecting and tackling tax non-compliance.

What are the tax rules for selling on online marketplaces?

You must tell HMRC if you:

  • You are trading on these platforms (i.e. buying and selling goods, or producing goods to sell)
  • and you’re making a profit above £1,000.

You must pay tax on your income if your total income (e.g. just online selling or salary + online selling etc.) is above your annual personal tax allowance (currently £12,570 for 2021/22).

However, you are able to deduct expenses from what you make such as listing, auction and sales fees that the online marketplace charge you, as well as many costs associated with the product, such as equipment hire, postage fees and travel expenses. Also, if you’re buying and selling, you can deduct what you paid for something.

Are your tax affairs in order?

Rachael Bonner, Personal Tax Manager at Rouse comments, “We have seen a growing number of sellers, gig workers, landlords and freelancers using online marketplaces in recent years and this has increased further during the COVID-19 pandemic.”

“It is important to remember that this information will soon be available to HMRC and may come under increased scrutiny. We therefore recommend those selling goods and services via online platforms to check their tax position now to make sure they are doing everything correctly.”

The consultation closes on 22 October 2021, and whilst the overall principle is unlikely to change, there could be some small amendments, such as bringing forward the 31 January deadline for this information to provided to you, to allow time for it to be used in your self assessment submission). We will update you on this in due course.

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If you would like us to release the burden of completing self assessments each year by handling this for you, or you require specific tax advice, please contact our team for a quotation.
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This information has been produced by Rouse Partners LLP for general interest. No responsibility for loss occasioned to any person acting or refraining from action as a result of this information is accepted by Rouse Partners LLP. In all cases appropriate advice should be sought before making a decision.

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