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HMRC Starts Compliance Check on Online Sellers

Published by Prerana
Published Date: May 14, 2024

With online commerce services rapidly on the rise, it has become evident that every part of our society must keep up. So, HMRC has started compliance checks on the highest reported earners who sell goods and services through online platforms. However, tax experts believe these early checks started by HMRC should not have been done without proper guidance and structure.

How Is HMRC Adapting to the Digital Landscape to Tackle Tax Evasion?

Income Tax and providing the knowledge of the sources of your income to a government body is not a new concept. Due to online platforms such as Etsy, eBay, Instagram, TikTok, and more gaining popularity as a selling platform, it has become significant to file tax returns to provide more transparency on income.

So, the UK government now has an agreement with the Organisation for Economic Co-operation and Development (OECD). This agreement allows HMRC to access seller information on online platforms with the aim of preventing global tax evasion.

Thus, platforms such as Uber, Deliveroo, Airbnb, Instagram, TikTok, Etsy, and others must collect their sales and income from their sellers and influencers and report to the HMRC by January 2025. Even though the data reporting deadline is not near, HMRC has already started compliance checks on the highest-earning platforms.

What If You Are an Influencer Earning Through TikTok and Instagram?

Influencers earning through social media platforms must be careful and collect all their financial information. If you are an influencer selling products on the internet, you should note that a sole trader must be VAT registered if their sales are over the VAT threshold, which is currently £90,000. Also, gifts received from brands and followers for promotional purposes are included in the VAT threshold calculation.

online business tax

Since HMRC has an agreement globally, your information is shared with other national tax authorities if relevant. For instance, if you sell your products in the US through Etsy, your income information will be shared between the US Internal Revenue Service (IRS) and HMRC.

All in all, you will need to send your information to HMRC and file for a tax return if you fall under one of these two categories:

  • Your earnings exceed the taxable income threshold
  • You are selling 30 or more items a year

However, if you are selling a high-value or luxury item, you must report it to HMRC as Capital Gains Tax rather than Income Tax. This condition applies if your sale exceeds the threshold of £6,000.

Conclusion

So, if you earn through online platforms as a side hustle or as a main source, you must consider collecting information on your income. This will help you have proper knowledge of the income generated and file for tax return if you fall under the tax bracket. Additionally, online platforms must remain careful and collect income information from their sellers and influencers, as HMRC compliance check have already been initiated.

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