HMRC to ramp up guidance on online platform tax compliance

Following a consultation on addressing tax compliance for those who use online platforms for selling, HMRC is to enhance its guidance and is working with international agencies to improve data collection from platforms hosted overseas

In its response to the consultation findings, HMRC said it accepted the view of many respondents that HMRC’s guidance could be improved for those using online platforms. HMRC will build on existing work to improve the help and support that is available on gov.uk, exploiting advances in technology to give customers guidance in a place and format that is accessible to them, including the use of ‘decision-based guidance’ and virtual assistant technologies to provide a more personalised experience.

The government will continue to explore with platforms the opportunities that exist for them to signpost users to this new HMRC guidance when it is available, alongside other help and support they provide to users.

In addition, HMRC is co-sponsoring with the Italian Revenue Agency (Agenzia delle entrate) an OECD Forum of Tax Administration (FTA) project looking at the effective taxation of participants in the sharing and gig economy. Work is focussing on voluntary compliance of platforms including targeted education of users as to potential tax obligations, data acquisition from the platforms and subsequent sharing between countries. A report with recommendations is to be published early next year.

HMRC says it is also exploring opportunities for technological solutions for users to share their own data directly with HMRC, working with platforms, software providers and others to build up HMRC’s API programme and develop apps to facilitate easier methods of reporting tax liabilities.

However, the response makes clear that HMRC is not minded to act immediately on suggestions from the Office of Tax Simplification (OTS) for a withholding system for those who work through platforms, which would provide a ‘PAYE-like’ experience for some users of online platforms.

HMRC stated: ‘There would clearly be significant complexity that would need to be overcome before any system could be introduced, and careful design to ensure that administrative burdens on all were minimised.

‘HMRC will continue to consider the arguments for change made by the OTS as part of its wider work to ensure that, where people have tax obligations because of these new opportunities, it is as easy as possible for them to comply.’

The consultation, which ran from March to June, attracted 41 written responses, from platforms, representative bodies, other businesses and individuals.

Some respondents argued that there was no evidence to suggest that online platforms created new opportunities for deliberate evasion. Several suggested that the additional audit trails and transparency of payments reduced both the opportunity and incentive for people not to comply.

Some platforms gave examples of sharing data with HMRC that helped identify those who may not be fully reporting income or profits, and suggested that online platforms supported compliance in some sectors where the alternative might be a prevalence of cash in hand work.

However, other respondents, primarily those businesses not operating through platforms, expressed concerns that because online platforms lower barriers to entry, they enable users to enter a market without fully considering the tax (or other) implications of their activities. They felt this may allow them to gain an unfair advantage by undercutting existing operators in the same markets. There was also a concern some platforms may allow users to operate pseudo-anonymously, without accurately identifying details of the user.

It was generally reported that platforms did not feel they should be giving advice to participants about their tax position, while it was difficult for users to find guidance on gov.uk. Although welcoming the £1,000 trading and property income allowances, some respondents, including representative bodies, expressed concern that they added complexity.

Consultation outcome: Online platforms’ role in ensuring tax compliance by their users is here

Report by Pat Sweet

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