In their latest one-to-many letter campaign, HMRC are targeting individuals believed to be operating in the hidden economy by selling via online marketplaces and not declaring their income.
The letters indicate that HMRC have Information that shows the recipient had earned income from Online marketplace sales up to the tax year ending 5 April 2023, which has not been declared.
HMRC point out that:
- An individual may be Trading and subject to Income Tax if they buy or make goods to sell at a profit.
- Income Tax may not be payable if an individual is selling personal items from their home. Depending on the nature and value of items sold, Capital Gains Tax might apply, but the Chattels rules should be considered.
It is requested that recipients of the letter consider their tax position and within 30 days either:
- Make a disclosure to declare any income that needs to be reported up to 5 April 2023.
- Advise HMRC that there are no taxable transactions to declare.
HMRC warn that if no action is taken they may open a compliance check and potentially Charge penalties.
Useful guides on this topic
Side-Hustles & Tax: At a glance
Do I need to pay tax on my side-hustle income? Is a side-hustle taxable? Is there a new side-hustle tax? Do I need to register for tax when I sell on eBay, Vinted or Etsy etc?
Online sellers: Tax
What are the tax implications of being an online seller? When does a hobby become a business? What is a side hustle? What expenses can online sellers claim for tax purposes? Are there special rules for taxing income? What are the VAT rules for online sellers?
Badges of Trade: Are you trading or not?
Are you trading, running a business, or just buying and selling investments? Is your 'side-hustle' taxable? The 'Badges of Trade' are a set of indicators, built up over time by the courts, to decide when an activity is a trading or investment activity.
Online Marketplaces: Selling goods in the UK
When do you have to register for UK VAT? When is UK VAT payable? What amount is VAT payable on? What information do you have to give the marketplace provider? What will it do with that information?
Making a tax disclosure (Digital Disclosure Service)
How to disclose errors or mistakes in direct taxes and notify HMRC of an under-assessment. A practical guide to making a tax disclosure using HMRC's online system.
CGT: How to calculate a capital gain or loss
How do you calculate a capital gain or loss? What costs are deductible? Can you set losses against capital gains?
CGT: Chattels
What are chattels? Is it a wasting or non-wasting chattel? How are capital gains on chattels taxed?
Penalties: Failure to Notify
What tax penalties apply if you fail to notify HMRC that you are chargeable to tax? Can they be appealed or reduced?
External link
