The UK Government has announced new terms which might force online sites such as eBay, PayPal and Airbnb to hand over information about those businesses who are earning money online. HM Revenues and Customs are estimating that about £5.9bn tax a year is currently being left undeclared by these British businesses.
Collection of Data
The new terms will stipulate that companies will have to supply data such as names and addresses of those who operate and earn money online, and by comparing this data with the data already held by the HM Revenues and Customs they will be able to identify businesses who are evading paying tax.
According to experts this will be a massive amount of new data which will require a huge upgrade to the HM Revenues and Customs databases, and there are fears that security and privacy could be compromised.
Although they haven’t announced which companies they will be going after, the Government has announced that they will be specifically concentrating on booking and reservation services, app stores and advertising. This means that those who use sites such as Apple, Amazon, Airbnb and Gumtree will be under more scrutiny.
Businesses not Individuals
The Government have announced, however, that individual people selling personal possessions will not be targeted, rather businesses making an income online. They said, “Effective tackling of the hidden economy will ensure a level playing field between those businesses and individuals who comply with their tax obligations and those that do not.”
They have noted, however that the law stipulates that tax is due on any profits made from the sale of products or services online just as offline. Although individuals selling possessions (for example) online on a one-off basis are unlikely to be targeted, those selling and making money on a regular basis are more likely to be scrutinised.
HM Revenues and Custom have announced a 12 week consultation, ending in October 2015 where they will be looking at “narrowing the hidden economy tax gap” as well as focusing on “making it easier for businesses to report taxable income”.
The new terms come as a proposed extension to the new powers which were given to HM revenues and Custom in 2013 which gave them access to debit and credit card data. These powers didn’t extend enough for the government to be able to access data from companies who facilitate online payments either by acting as intermediaries or by allowing and processing online payments.
The government’s new proposals are aimed at finding those who are evading or avoiding tax and not at innocent people. They stress that those people and businesses that are tax compliant should see “little or no impact”. They believe that the new changes will enable HM Revenues and Customs to find an extra £860 million over the next five years, an amount which, given the state of the economy today, surely cannot be ignored.
About the Author
Alex Viall is the Director of Mustard IT, a London-based company that offers professional IT support to businesses across London and the Home Counties.