HMRC has confirmed that the UK will be adopting the expanded version of the OECD reporting rules for digital platforms, meaning that websites and apps will have to report the incomes of sellers of goods as well as personal services, potentially from January 2023.
In a new consultation, HMRC has outlined its plans to implement the Organisation for Economic Co-operation and Development (OECD) Model Reporting Rules for Digital Platforms. The rules will mean that websites and applications based in the UK will have to report the income arising in the previous calendar year of “sellers” using their platform to HMRC and to the sellers on 31 January following the year end.
The Chancellor confirmed that the UK would be adopting the OECD rules in the 2021 Budget. At the time the rules only covered the provision of personal services (such as food delivery, freelance clerical work, housekeeping), accommodation and transport (such as taxis).
The OECD published an extension to the rules in June 2021 to include the sale of goods and rental of transport. HMRC confirms in the consultation that the UK will be adopting the extension to the rules and estimates that 2m-5m businesses could be affected, although it expects that the impact for individual sellers will be small.
The consultation states that the rules would not be implemented until January 2023 at the earliest and requests opinions on the practical implementation of the rules, as well as on areas where the government has flexibility in adopting the rules, such as exclusions, and its proposed approach to penalties for non-compliance.
Under the OECD rules, digital platform providers have to report annually the income of individuals or companies selling goods or providing services via their platform to the tax authority where the platform is “resident, incorporated or managed”.
Alongside recording and reporting the sellers’ incomes, the platforms must also collect and verify information that identifies the seller and their location, as well as the location of rental accommodation. This will enable HMRC to share the income data with the tax authorities where the seller is resident or where a property is located.
The platforms are also required to provide a copy of the information to the seller each year, to help the seller declare the correct amounts for tax purposes. The rules state that the data is to be provided on 31 January each year.
The government can exclude certain platforms from the requirements and has proposed that those facilitating less than €1m of relevant services in the preceding 12 months are exempt. HMRC claims that this will remove the administrative burden for new entrants into the digital marketplace.
Other platforms that can demonstrate that their business model does not allow sellers to profit from the payments they receive, or that they do not have any “reportable sellers” will also be exempt from the rules under the current proposals.
Sellers are not deemed “reportable” if they provide more than 2,000 property rentals per year (generally large providers of hotel accommodation) or those who make fewer than 30 sales of goods a year totalling no more than €2,000 (“occasional sellers”).
To ensure the accurate transmission of data platforms and tax authorities need a way to identify taxpayers. HMRC’s consultation acknowledges that there are four potential tax identification numbers (TINs) for UK resident sellers (unique taxpayer reference, national insurance number, company registration number, VAT registration number) each with advantages and disadvantages.
As a result, HMRC is proposing that platform operators will be able to chose from a range of TINs in their reporting and is requesting feedback on which number, or combination of numbers, would be most appropriate to use.
HMRC is also looking to digital platforms to suggest ways in which they could potentially provide sellers with data outside of the annual requirement of 31 January. The consultation outlines the example of a UK seller completing self assessment tax returns who would not be sent data for the period 1 January and 31 March until 31 January the following year, the date upon which their self assessment return is due.
As platform operators have to report the amount paid to each seller for each quarter of the reportable period, the consultation asks whether they would be able to send reports to the sellers more frequently, for example, monthly, quarterly or half-yearly.
The consultation concludes by outlining its proposed approach to penalties for non-compliance, which includes one-off single penalties for reporting incorrect or incomplete information, and initial and continuing daily penalties for failing to comply with the collection, verification and reporting requirements.
Other areas upon which the consultation is looking for feedback, include:
- Only having one file format for reports (XML).
- Whether a government verification service, enabling platforms to check the location of sellers, would be useful.
- The interaction between the OECD’s reporting rules and the EU’s DAC7 rules for automatic exchange of information for digital platforms.
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