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Digital Marketplaces – New requirement to report trader details to HMRC from 1 January 2024

From 1 January 2024, changes came into force which require digital platforms to report details of their sellers, including income of the sellers, to HMRC.

This measure is being introduced in order to enable HMRC to detect and tackle non-compliance of sellers who use these marketplaces. Such marketplaces caught by these new rules include AirBNB, Vinted, Etsy and eBay but will also include much smaller operations.

Examples of activities caught by the rules are as follows if the platform facilitates the provision of these and the services/goods are provided for consideration (generally money):

  • Rental of immoveable property
  • Provision of a Personal Service
  • Rental of means of transport
  • Sale of goods

Some specific categories of seller are not reportable, those which HMRC see as low risk, but need to be assessed on a case by case basis that they do no fall within the above list.

If sellers supply anything other than the services/goods listed above – the platform will likely not need to report details pertaining to these sellers, and can also exclude

  • Sellers of the rental of immovable property where more than 2,000 supplies made in the year (logic being high volume sellers like this will be more compliant than property owners in sharing/gig economy)
  • Sellers of goods where less than 30 supplies made in the year and the total value of which does not exceed €2,000

Who is affected?

Digital platform operators where resident in the UK, including apps and websites, which provide goods and services such as taxi services, private hire, food delivery, freelance work and short-term accommodation will need to collect and report the information to HMRC. For example, any client who operates a holiday bookings website as “agent” for its property owners are likely to be caught by these new rules. Similarly, any taxi firm who may operate (in full or in part) an app based bookings system and uses self employed drivers.

Some platforms are excluded where they do not have reportable sellers, or if sellers are not allowed to obtain profit from sales. HMRC guidance states a platform operator can be excluded whose entire business model is such that:

  • it does not allow sellers to derive a profit from the payments received (e.g. a platform that facilitates car-sharing to a particular destination. Others joining the “seller” (person who offered the car sharing opportunity) simply contribute towards the cost of the travel and so the “seller” does not derive any profit from this), or
  • it does not have any Reportable Sellers (please see above)

Sellers may be required to provide information to their platforms, including deposit bank account information, which they may not currently do, to allow the platforms to accurately provide the required information to HMRC. The impact on each seller to provide the information is however expected to be minimal.

Following the information being provided to HMRC, the information will then be exchanged with relevant participating tax authorities where the seller is tax resident (or where the property is located e.g. holiday accommodation). These rules are being introduced as part of a wider OECD directive, and so HMRC will exchange non-UK seller’s information with the appropriate foreign jurisdiction, and vice versa.

When does this apply from, and what needs to be done?

The regulations came into effect from 1 January 2024 in the UK.

Platforms will need to ensure that they notify HMRC if affected and report the information to HMRC, via an electronic reporting system, by 31 January 2025 for the first year and annually thereafter.

The platform operators will need to ensure that they provide the sellers with the information they provide to HMRC by 31 January to allow sellers to have accurate information for their tax reporting.

What are the penalties for non-compliance (by the marketplace)?

Penalties, ranging from £1,000 to £5,000 plus potential daily penalties of up to £600 per day, will apply for;

  • late reports,
  • failing to provide information to sellers or HMRC,
  • inaccurate record keeping,
  • failing to notify HMRC,
  • inaccurate or incomplete reports
  • not applying due diligence procedures.

Failure to apply appropriate due diligence procedures will give rise to a penalty of £100 per seller.

Please get in touch with our VAT team if you require any further advice.

FEATURING: Jason Every
Jason is a VAT consultant in the VAT and Customs team. He advises upon a number of complex and wide ranging VAT issues for clients… read more
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