On 7 November 2018 the UK government published a summary of responses to a consultation on the role of online platforms in ensuring tax compliance by their users. The government received 41 written responses with comments from online platforms, representative bodies, businesses and individuals. Meetings were held by HMRC with a number of online platforms and other businesses and their representatives to consider the issues facing users of online platforms when complying with their tax responsibilities.
Online Platforms are increasingly playing a role in the UK economy resulting in new opportunities to earn money and increasing the amount of choice for consumers. The government is looking for ways to make tax compliance as easy as possible for users of these online platforms. The consultation launched by the government earlier in 2018 called for evidence on the contribution that platforms could make in helping their users to comply with their tax obligations. The consultation requested information about current activity in supporting the users of online platforms and considered potential approaches to the issue.
The summary of responses published on 7 November 2018 points to the next steps that will be taken to improve tax compliance for users of online platforms. Digital platforms are operating in many different sectors of the economy and many of the platforms have a wide range of users. There are some issues common to all digital platforms and their users, such as a need for improved guidance. Some steps to improve tax compliance may however need to be more targeted to ensure they are proportionate to the relevant issues. The government will continue to gather evidence as it works out future steps to encourage compliance, working collaboratively with the online platforms.
Help and guidance
Following the suggestion of many of the responses to the consultation HMRC will continue to build on existing work to improve the help and guidance available on the gov.uk website, giving support in the place and format that is most accessible to the relevant users. This will include the use of decision-based guidance and virtual assistant technologies.
Data on user activities
HMRC considers that all online platforms operating in the UK should face the same obligations relating to provision of data. Many online platforms are working collaboratively with HMRC to provide data about user activities and this data can help HMRC identify non-compliance and plan targeted compliance interventions. However if an online platform is not based in the UK there may not be a playing field between platforms in relation to provision of data. The UK government will look at ways to effectively access data about users regardless of the business model used by the online platform.
HMRC and the Italian revenue agency are co-sponsoring a project by the OECD’s Forum of Tax Administration (FTA) to look at the effective taxation of participants in the sharing economy and the gig economy. This project aims to put together a coherent international compliance response to these parts of the economy and is focusing on voluntary compliance by online platforms as well as targeted education of users, data acquisition from the platforms and information sharing between countries. A report setting out recommendations will be published early in 2019.
Tax deduction at source
Some responses to the consultation suggested a system similar to the PAYE system of tax deduction at source could be suitable for some users of online platforms. The Office of Tax Simplification (OTS) has recently published a paper proposing a withholding tax system for people working through platforms in the gig economy. This would reduce the possibilities of errors or mistakes in determining the correct tax liability. Other respondents to the consultation including online platforms considered the compliance burden on the platforms in operating such a system to be too high. HMRC will continue to consider the case for the introduction of this type of system.
