UK adopts OECD platform disclosure rules
15 August 2023
There is little doubt that online businesses which facilitate peer-to-peer trading, from eBay to Airbnb, have had a dramatic effect on the markets that they have entered. While these businesses have provided significant income opportunities for many, tax authorities have struggled to manage their impact. However, recent developments in legislation and case law are about to give HMRC more powers to gather tax due, including a new UK requirement for platforms to provide information on sellers.
Earlier this year the European court’s VAT decision in Fenix International caused consternation for some platform operators, who suddenly found themselves faced with the prospect of charging VAT on the monies earned by content providers, rather than just on their own income. The DAC7 rules in the EU were also introduced this year, compelling platforms in the trading bloc to provide tax authorities with information on sellers using their sites. The UK is about to introduce its own version of DAC7, that will take effect in 2024. The question is who will be caught by these rules and how will they be affected?
Following a consultation period announced at the end of 2022 and in line with OECD guidelines, the government passed new regulations which will take effect on 1 January 2024. Any UK-based software platform that facilitates peer-to-peer trading in immoveable property (similar to Airbnb) or the provision of a personal service which includes (but is not limited to) delivery, transportation, or tutoring services will be required to conduct due diligence on active sellers using their platform and report information on them to HMRC annually.
The diversity of online business models means that operators must approach these new rules with care. Not all operators in this sector will be covered - listing or advertising platforms, sites that solely process payments or provide a link to the service provider are excluded, and there may also be scope for small or not-for-profit platforms to claim an exemption from the new rules. There are penalties for non-compliance so those who wish to rely on these exceptions must tread carefully.
If no exclusions apply to an online business’s activity and it concludes that it is a platform operator, then it must report this to HMRC. Once the rules come into force, platform operators will be required to provide a report to HMRC by 31 January on the preceding year’s active sellers (eg on or before 31 January 2026 they must report the activity that took place between 1 January and 31 December 2025). To complete this report, their systems must be able to record the activity of their registered sellers. Once active sellers have been identified, specified information must be reported to HMRC, including their name, address, tax identification number and the property addresses (for property platforms).
In the short-term, these new reporting obligations present a challenge for the industry to navigate at a time when there are many economic headwinds. But, in the medium to long-term these reforms might add to the sector’s credibility in the public’s mind. The vast majority of the sellers want to comply with tax law provided it is straightforward and fair, so, in our view, the key to the success of this new regime will be for the government to make sure it also simplifies the tax system for sellers using these platforms.
Earlier this year the European court’s VAT decision in Fenix International caused consternation for some platform operators, who suddenly found themselves faced with the prospect of charging VAT on the monies earned by content providers, rather than just on their own income. The DAC7 rules in the EU were also introduced this year, compelling platforms in the trading bloc to provide tax authorities with information on sellers using their sites. The UK is about to introduce its own version of DAC7, that will take effect in 2024. The question is who will be caught by these rules and how will they be affected?
Following a consultation period announced at the end of 2022 and in line with OECD guidelines, the government passed new regulations which will take effect on 1 January 2024. Any UK-based software platform that facilitates peer-to-peer trading in immoveable property (similar to Airbnb) or the provision of a personal service which includes (but is not limited to) delivery, transportation, or tutoring services will be required to conduct due diligence on active sellers using their platform and report information on them to HMRC annually.
The diversity of online business models means that operators must approach these new rules with care. Not all operators in this sector will be covered - listing or advertising platforms, sites that solely process payments or provide a link to the service provider are excluded, and there may also be scope for small or not-for-profit platforms to claim an exemption from the new rules. There are penalties for non-compliance so those who wish to rely on these exceptions must tread carefully.
If no exclusions apply to an online business’s activity and it concludes that it is a platform operator, then it must report this to HMRC. Once the rules come into force, platform operators will be required to provide a report to HMRC by 31 January on the preceding year’s active sellers (eg on or before 31 January 2026 they must report the activity that took place between 1 January and 31 December 2025). To complete this report, their systems must be able to record the activity of their registered sellers. Once active sellers have been identified, specified information must be reported to HMRC, including their name, address, tax identification number and the property addresses (for property platforms).
In the short-term, these new reporting obligations present a challenge for the industry to navigate at a time when there are many economic headwinds. But, in the medium to long-term these reforms might add to the sector’s credibility in the public’s mind. The vast majority of the sellers want to comply with tax law provided it is straightforward and fair, so, in our view, the key to the success of this new regime will be for the government to make sure it also simplifies the tax system for sellers using these platforms.
