In July 2021 HMRC opened a consultation ‘Reporting rules for Digital Platforms’ which considers the implementation of the new Organisation for Economic Co-operation and Development (OECD) Model Reporting Rules for Digital Platforms.
At a glance
The OECD rules require digital platforms to report details of income of sellers on their platform to the tax authority where the platform is resident, incorporated or managed and where the seller is resident and provide a copy of the income information to sellers to help them declare the correct amounts for tax purposes.
The platforms will also be required to:
- Identify and verify who the seller is, including name, address, date of birth or company number and tax identification number.
- Determine the seller’s country of residence.
- Collect the address of each property listing where the seller provides property rental services
The rules define digital platforms as websites or apps that facilitate transactions between providers of goods and services and their customers.
Only certain services provided by sellers come within the scope of the rules. These ‘relevant services’ are:
- Rental of ‘immovable property’
- ‘Personal services’ e.g. taxis, food delivery, accountancy, clerical and legal tasks, labour such as gardening and housekeeping, data entry, IT services, copywriting and seasonal/temporary work such as at restaurants
- Transport rental if provided for a ‘consideration’.
The information collected must be provided in a standardised OECD Sharing and Gig Economy XML Schema for which HMRC will develop an online service which will also require reports to be in XML format.
- The reporting deadline for any reportable period will be 31 January of the year following the calendar year in which a seller is identified as a reportable seller.
- There will be penalties for failure to report and for providing incorrect or incomplete information.
There were originally three categories of ‘excluded sellers’ for which no reporting is required, being entities that:
- Provide more than 2000 property rentals per year e.g. large hotels.
- Are government entities including local authorities and government agencies.
- Are listed entities whose stock is regularly traded on an established securities market.
Occasional sellers who make less than 30 sales of goods a year totalling not more than €2,000 were optionally added to the excluded seller list in June 2021.
The rules have been agreed internationally but have optional elements and leave it to participating jurisdictions to decide how to implement them. The UK was one of the first countries to announce that it would implement the rules. HMRC have advised the ICAEW that the rules will not be introduced until at least January 2024 (having announced in the consultation an earliest adoption date of January 2023).
The government hopes that the new rules will:
- Improve international cooperation on the exchange of information for tax purposes.
- Allow HMRC to access data from platforms based outside the UK quickly and efficiently as tax authorities will exchange information.
- Help taxpayers to get their tax right and help HMRC to detect and tackle tax non-compliance.
The consultation sets out the OECD rules in detail, inviting views on the optional elements as well as the UK’s proposed implementation plans.
The government proposes that the following optional elements of the rules would apply to the UK:
- Platform operators to be excluded where they:
- Facilitate the provision of relevant services for which total payments over the previous year are less than €1 million, and elect to be treated as excluded from reporting.
- Demonstrate that the platform’s business model does not allow sellers to profit from the payments received, or that they do not have any ‘reportable sellers’.
- The sale of goods and transport rental to be included as an extension of the rules.
- Occasional sellers to be included as an extension to the excluded seller list.
Useful guides on this topic
Common Reporting Standard (CRS)
The Common Reporting Standard (CRS) is a global standard for the automatic exchange of information which has been commissioned by the Organisation for Economic Cooperation and Development (OECD)
Digital Services Tax
The Digital Services Tax (DST) is a temporary mechanism to tax online sales pending a global solution. How does it work? Who is caught?
AML: Identification and Verification, Individuals
A flow chart and decision matrix to assist with determining the level of risk to assign to new clients (individuals) when completing your client take on procedures. For use by non-credit/financial institutions and non-FCA regulated firms.
AML: Identification and Verification, Entities
A guide to Anti-Money Laundering (AML) identification for entities specifically related to UK private companies, Limited Liability Partnerships (LLPs) and partnerships. What checks are required under AML rules for identification and verification? What is covered in identification? How do you verify ID?
Q1: Do you agree with the government’s proposals on excluding certain platform operators? Please indicate whether you think platforms would make use of the exclusions in practice and what factors might influence these decisions.
Q2: Are the definitions on the scope of the model rules sufficiently clear? Are there scenarios not anticipated by the rules where guidance is needed?
Q3: Is any additional guidance needed in light of the government’s plans to adopt the extension of scope (to the sale of goods and transport rental) in its implementation of the model rules?
Q4: Do you have any comments on how you would like the interactions of the model rules and DAC 7 to operate in practice?
Q5: Do you have any comments on the practical application of the rules on collecting the required information about sellers and rental property?
Q6: Which number, or combination of numbers, would be appropriate to use as a Tax Identification Number (TIN)? Please give reasons to support your view.
Q7: Do you have any comments on the practical application of the rules for collecting and verifying the data?
Q8: Would stakeholders (both sellers and platforms) find a Government Verification Service useful if one was available? Please give reasons for your view.
Q9: Do you have any comments on the practical application of the rules in relation to the timing, active seller option and third party due diligence requirements?
Q10: What are your views on the government only offering the option to submit reports directly in an XML file format and removing the manual reporting option? Would you use an API to share info with HMRC if it was available? Please explain your answer.
Q11: How could platform operators provide information to sellers about their income at an earlier point to make it more useful?
Q12: How can HMRC and platform operators work together to provide appropriate information to sellers to help them understand and comply with their tax obligations? What guidance would sellers find useful?
Q13: Do you have any comments on the practical application of the rules relating to the reporting requirements?
Q14: Does the proposed penalty approach meet the government’s objectives of being reasonable, proportionate and effective in ensuring compliance with the model rules?