HMRC finds another source of unpaid taxes ‘hidden’ online – and it’s worth £15 billion in tax revenues!
Are you part of the ‘sharing economy’, a ‘collaborative consumer’? No, we didn’t know either! But this is an area of tax collection that HMRC will be focussing on in 2016 and their powers have been extended even further to facilitate their success.
What is ‘collaborative consumption’ and the ‘sharing economy’?
Well, there are a lot of different terms that are used interchangeably to define this phenomenon and it’s not for your average ebay trader.
Our favourite is the ‘hippieconomy’. Basically, the emphasis is on access to goods or services, rather than outright ownership; all the ‘old school’ systems of swapping, bartering, lending, renting, gifting and simply sharing products. The internet and the rise of networks devoted to these methods of trade has taken us from ‘Saturday Swap Shop’ and home clothes swap parties, to efficient online systems that are working on a huge scale.
The recession and subsequent ‘austerity measures’ have encouraged people to think more creatively and pool resources to make their money go further. Online market places like Kickstarter, Airbnb, Taskrabbit and Etsy all provide a more direct connection between the seller and consumer – without the usual middlemen adding to the production costs. Networks like eBay, Getable and Freecycle provide a safe, established system through which people can sell or exchange goods.
What does it mean to HMRC?
Basically, if you are making any money from any kind of online trading, declare it to HMRC usually on a tax return. They are looking to find those smaller businesses that operate online and are not declaring their sales honestly and therefore not paying their fair share of taxes. They value this as worth £15billion of taxes lost to the public purse.
For example, according to Chas Roy-Chowdhury of the Association of Chartered Certified Accountants:
“Money made by renting out property through Airbnb will be classed as income and must be declared to the taxman. If you are using the site to rent out a property you own then I would strongly advise to make the necessary declaration to HMRC. “
It’s all about data collection for HMRC. Section 228 of the 2013 Finance Act granted HMRC the power to collect data from companies that process debit and credit card transactions. New extensions to these powers mean that they are entitled to access the data of any company that handles electronic payments and any organisation that allows “customers to make orders, purchases or reservations, relating to goods, services or digital content”. This way they can identify any businesses that are not declaring their trading honestly. The biggest companies are reputed to be the primary target this year, including: Apple, PayPal, Airbnb, Amazon and online marketplaces like Etsy.
In HMRC’s own words:
“Data can be particularly powerful when it is collected from third parties who facilitate trade, either between businesses, or between businesses and consumers. This is because they can provide information in bulk about the activity of large numbers of traders; and because third party data can be used as an independent check against the data that taxpayers themselves report to HMRC. Data about taxable activity plays a key role in enabling HMRC to detect those operating in the hidden economy and to target resources to tackle them more efficiently.”
As ACCA, Chas Roy-Chowdhury warns:
“HMRC are under tremendous pressure from the government to increase the tax revenues collected. If they believe that you are deliberately withholding information about a source of income they will look to penalise you.”
Forewarned is forearmed!
