New rules from the OECD require digital platform operators (such as Air BnB and Uber) to report details of sellers using their sites to the tax authority where the platform is resident. The rules will apply in most EU territories from 1 January 2023 (1 January 2024 for UK resident platforms).
The regulations implementing the regime in the UK are expected to be laid before Parliament by the end of April 2023. In the meantime, HMRC is drafting guidance based on the OECD rules and the UK regulations. This follows completion of a consultation process to which ICAEW’s Tax Faculty responded.
A number of uncertainties remain as to how the rules will be applied in practice. HMRC hopes to resolve these uncertainties through written guidance.
If you represent a digital platform operator, or otherwise have an interest in the rules as they apply to UK resident platform operators, the Tax Faculty would appreciate your views on the following six questions. Please send your comments to Richard Jones.
- To what extent must a platform 'connect' users and sellers to 'facilitate' the provision of goods/services/activities?
The concept of ‘facilitation’ appears in the OECD’s frequently asked questions, published in January 2023. This is in the context of three tests that software must meet to qualify as a platform (it must, among other tests, “facilitate the provision of Relevant Services/Activities”).
What level of involvement is required from the platform in order for the software to qualify as a platform? Can examples be provided of such facilitation?
HMRC’s view is that, where software facilitates the provision of goods or services, the degree of facilitation is not important. Software counts as a ‘platform’ if it enables any connection between sellers and their customers – therefore facilitating the provision of goods or services. The exception is where the software is only listing or advertising goods or services.
- Where an activity is facilitated by more than one reporting platform operator (RPO), which RPO will be in scope and who will be responsible for collecting and reporting the required information?
Where a platform provides software or an app that can be used by other entities and platforms to facilitate the provision of goods/services by sellers, in HMRC’s view, the platform operator is the entity that contracts with the seller. This is the case even if this is not the same as the platform or entity that provides the ‘platform’ and facilitates the provision of relevant activities.
If that platform operator is resident in a reportable jurisdiction, it will then be a reporting platform operator.
Where there is potentially more than one reporting platform operator, they can agree which one will collect and report the required information. A reporting platform operator does not have to report if it reasonably believes that another platform operator will be reporting the required information.
- Where a person receives payment for providing goods or relevant services via an agent or other intermediary, is the seller the intermediary or the provider of the goods/services?
This might arise, for example, where a letting agent posts a property on a platform on behalf of the owner.
HMRC’s view is that the seller is the person who is registered on the platform, even if that person is not the same as the one who is providing the goods or services. For example, if a property letting agency registers on a platform on behalf of owners who are renting out their properties, the seller would be the letting agency, and not the owners. This is the case even though the owners are providing the rental service and the rental payments may be made directly to them.
- How should online vouchers, tickets etc, that could be converted to tangible (paper) items or that entitle the user to services provided by a seller be treated?
There are a number of issues to consider here. HMRC’s primary focus is on whether a voucher offering a right to a personal service is included in the definition of a ‘relevant service’ and can therefore be a reportable transaction.
While vouchers are intangible and hence not ‘goods’, HMRC’s believes that the issue of a voucher for the provision of a relevant activity, such as goods or personal services, should be treated as the provision of a relevant activity. This will therefore be reportable at the time of payment for the voucher.
There may also be instances where vouchers issued by a platform operator are later used as consideration on the platform in exchange for the provision of relevant activities. In this case, the redemption of the voucher should be treated as the payment of consideration in exchange for a relevant activity.
- How do platforms carry out due diligence/verification?
This question is seeking input on the procedures platform operators already have in place to verify the identity of sellers using their platforms. Would this be sufficient to satisfy the new requirements? What additional procedures might need to be put in place?
Reporting platform operators, according to HMRC, should make use of all the information that is available to them – or to other entities that carry out due diligence – for verification purposes. The verification procedures will depend on the nature of the business, the reliability and availability of the information held, and the circumstances of the seller.
HMRC therefore cannot prescribe the exact procedures to be put in place. Platform operators should take such steps as they deem to be appropriate.
- How does a platform operator determine whether the details provided by a seller are ‘reliable’?
What HMRC is getting at here is how platform operators go about questioning details that on the face of it do not appear to be genuine (eg, a tax identification number of 111222333).
HMRC’s wants reporting platform operators to determine whether information is reliable using all the information available to them. Reporting platform operators are not under a general obligation to require additional documentation from sellers beyond what they already collect in line with their onboarding, commercial or regulatory requirements.
However, and particularly in cases of doubt, reporting platform operators may seek additional documentation or publicly available information to assure themselves that the information collected is reliable. For example, if a national insurance number does not appear to be genuine, a platform operator could use a publicly available tool to confirm that the format is correct.
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