As part of Chancellor Philip Hammond’s Spring Statement, HMRC is seeking views on how the tax authority can engage with online platforms, such as eBay and Uber, to promote tax compliance among its users
As part of its consultation, HMRC wants to understand how platforms interact with their users currently, what they know about them, and understand more about attitudes to tax among people earning money through the platforms.
The tax authority wants to promote tax compliance through online platforms to minimise opportunities for people to exploit this area to evade tax, at the same time as supporting those who want to comply.
Toby Ryland, corporate tax partner at HW Fisher said: ‘The days of businesses masquerading as individuals to avoid tax when selling goods on online platforms like eBay are numbered. The government has long identified this problem as a serious drain on its VAT revenues, and the Chancellor now plans to tighten the screw further.
‘While this is still just a consultation, it opens the door for the government to force online platforms to deduct VAT from sales, and then oblige sellers to prove they are eligible to claim it back. However such an approach would be a hammer to crack a nut, and is likely to raise lots of tricky questions about whether the platforms will have to deduct VAT from all sales, or just those made by sellers they think are businesses.’
Online platforms such as eBay offer the opportunity for users to make money. Although some of these methods may not attract any tax liability ie, selling unwanted items, individuals are at risk of falling within the legal definition of trading without understanding that their activities have become taxable.
Previous HMRC research has shown that only half of those earning money through the sharing economy believe they know enough to fulfil their tax obligations.
Therefore HMRC is asking individuals how the tax authority and these online platforms can work together so that users are fully aware of their tax obligations to further close the tax gap.
The consultation closes on 8 June 2018.
Report by Amy Austin