Tech companies have long been notorious for dodging tax. However, due to their global nature, governments worldwide have found it very difficult to control giants like Amazon, Google, Uber, etc.
If you have a business that uses some of these platforms, some significant changes are on the horizon, which will affect your income.
From January 2023, HM Revenue & Customs has imposed all online marketplaces to report income earned by businesses using their platforms.
Jesse Norman, the Treasury minister, said:
“The new rules will improve international co-operation on the exchange of information for tax purposes. They will allow HMRC to access data from platforms based outside the UK quickly and efficiently, which should encourage compliance and increase the visibility of transactions.
The rules will also help taxpayers to get their tax right and will help HMRC to detect and tackle tax non-compliance.”
Essentially, tech companies would be required to directly share all sales transactions with HMRC for sellers using their platforms and are residents in the UK.
There is an exemption to this rule for start-up tech companies and businesses earning below £1700.
In addition to the sales transactions, online marketplaces will be required to share sellers’ locations as well. This will help HMRC identify if a seller is operating from outside the UK, so the relevant tax authorities can be notified.
Information that will be shared with HMRC; online platforms will be required to share this with the sellers to declare accurate income for tax purposes.
This plays a significant role for people who have been trading on these platforms, not knowing that they are due to pay tax if their sales had increased over the personal allowance threshold of £12570.
All individuals looking to get involved in their online marketplace need to pay close attention to their sales figures. As HMRC will have a direct record of their transactions, it would be worth hiring an accountant for advice from the get-go.
In summary, the following is how this model would work:
- Online market platforms will be required to collect data of all the sellers registered on their platforms. This will mainly be who the seller is and their location, along with the total sales transactions through the year.
- Platforms will be required to perform due diligence on the seller’s information, ensuring its accuracy.
- Platforms will be required to report to HMRC annually by the 31st of January.
- All the information shared with HMRC will also be required to be shared with sellers, ensuring accurate tax returns.
- Tax authorities will exchange information of sellers where they are residents.
- This policy change ensures compliance is being followed correctly and to catch those who have been non-compliant.
- There may be penalties for non-compliance for both the sellers and online platforms.
If you are a business and your sales are predominantly from one of these platforms, it would be advisable to speak to your accountants, who will ensure you comply with these new rules.
If you require further information or would like to discuss how to set up your eCommerce business to be compliant with HMRC’s regulations, please call us for a free consultation.