19 January 2024
In some households, the tradition of giving presents at Christmas is followed by a new custom of selling unwanted gifts in January. Gran’s idea of fashionable clothing may not be the same as yours, but there’s bound to be someone out there who will love that jumper covered in kittens…isn’t there?
The platform operators' reporting rules
If you are one of the millions of UK individuals selling second hand items on digital platforms, you need to know that, from 1 January 2024, operators of such platforms are required to collect data on your income from sales and make reports to HMRC. These new obligations also impact those renting out properties via websites such as Airbnb and people selling their services online, and will assist in providing HMRC with a far more comprehensive view of this part of the digital economy. HMRC can then match and verify the information it receives against taxpayers’ records to make sure individuals are correctly reporting their income on their tax returns.
If you are an occasional seller receiving no more than €2,000 for fewer than 30 sales in a reporting period, your information is not required to be provided to HMRC. However, that doesn’t mean you do not have any tax reporting obligations.
Are you trading?
Depending on the number of sales you make, the nature of the assets you sell and whether you have a profit-seeking motive (for example, if you buy premium items from outlets with the intention of selling them at a profit online), your little side hustle might amount to a trade, in which case a self-assessment tax return may need to be filed with HMRC and income tax and National Insurance contributions paid accordingly. If you make online sales of £1,000 or more in a year, even if you have no other trading income, you will need to consider whether a tax return is required.
The correct amount of tax
The good news is, the information collected by digital platforms must be shared with sellers as well as with HMRC, which should help taxpayers get their tax affairs right. However, whilst the law on what amounts to a taxable trade has not changed, it could bring a whole new group of individuals within HMRC’s reach, and even with the information provided by the platform it is likely that there will be a lot of cases where tax returns are not filed correctly. Where this happens, we expect to see HMRC follow its existing successful ‘nudge’ approach, sending a standard letter to sellers where the data suggests that a filing obligation could exist, to provide them with the opportunity to check their position and correct it before HMRC issues a formal enquiry notice.
The new information requirements appear to strike a good balance between identifying online traders and ignoring individuals doing a one-off wardrobe clear-out. Lots of small businesses have begun from casual online re-selling and the boundaries between tidying up your flat and starting a trade can be blurred. Providing sellers with details of their activities is a good way to help them see when they may have crossed the line into commercial activity, but it will be important not to file the report in the same bin as the kitten sweater when it arrives.
For more information, please get in touch with Andrew Robins or your usual RSM contact.