On 20 July 2022 the UK government published a summary of responses to the consultation on the reporting rules for digital platforms and its views on the responses.
The consultation document published in July 2021 invited comments on the implementation in the UK of the OECD Model Reporting Rules for Digital Platforms, under which digital platforms would be required to report information on the income of sellers on their platform.
Exclusions
Respondents to the consultation considered that exclusions might be exploited; that they would create competitive disadvantages; or that they would undermine the policy objectives of tackling evasion.
In view of the increased burdens and uncertainty that this could create, the government has decided that the small platform exclusion should not be available.
Scope
Respondents generally supported extending the scope of the rules to include the sale of goods and transport rental. They agreed with an exclusion for sellers that only sell a few goods occasionally, and some suggested extending this to the provision of services.
The government has decided apply the new rules to the sale of both goods and services and will also adopt the ‘occasional’ seller exclusion to reduce compliance burdens. This would also align the UK rules with the EU’s DAC7 rules.
Compliance burden
Several respondents were concerned about the additional compliance burden on digital platforms from collecting and checking the required information from sellers. Currently platforms do not routinely collect some of the data that would be required.
The government recognises the compliance burden and is only requiring the minimum amount of data to be collected and verified to identify the seller. HMRC will be providing guidance on due diligence after discussions with platforms.
Verification service
Most commentators considered that the proposed Government Verification Service (GVS) could help to reduce the costs of verifying seller data and avoid any problems from requesting confidential data.
The government has identified limitations in the proposed GVS and will continue work with stakeholders to develop a more effective GVS.
Reporting deadline
Respondents also supported the extension of the reporting deadline in some circumstances and the freedom to use a third-party service provider to carry out due diligence checks. The government will include these optional additions in the new rules.
Complexity
Commentators expressed concern about the complexity of the reporting obligations and the limited time available to change their systems. They also wanted clarification on how some items should be reported.
The new reporting rules would apply from 1 January 2024, with the first reports due in January 2025. This would give the reporting platforms more time to prepare. HMRC will also be considering simplification of the process and will be providing detailed guidance on the reporting requirements.
Information provided to sellers
Many respondents pointed out that the digital platforms already provide sellers with regular information about their income and transactions so they could provide more frequent reports to sellers to help them complete their tax returns. The government will encourage platforms to do this but will only require them to provide reports to sellers on an annual basis.
The respondents also emphasised that many sellers found it difficult to obtain information about their tax responsibilities and were often unaware of them. There were concerns that platforms were not in a position to provide tax advice, and that current guidance for sellers on the UK government website was not sufficient.
The government will not require all platforms to provide tax information for sellers, but it will discuss how information and guidance for sellers on the government website could be improved.
Penalties
A number of respondents commented that platforms should not be subject to penalties in some circumstances and some suggested that a ‘light touch’ should be applied initially.
HMRC confirmed that penalties would be reduced for mitigating factors and would not be charged if a platform has a reasonable excuse for failing to comply. It would be possible to appeal against a penalty.
Next steps
The government will be publishing draft regulations for an eight-week consultation. The regulations are expected to be finalised in late 2022 or early 2023.
