New 1 January 2024 tax rules for digital platforms to report income made by sellers
Naomi Quant · January 2nd 2024 · read
From the 1 January 2024 there are new reporting requirements for “platform operators” in the UK.
The regulations are part of a wider scheme to combat the tax gap created by the facilitation of small traders in accessing a wider audience through digital platforms and implement the Model Reporting Rules for Digital Platforms as suggested by the OECD.
The EU adopted the Model from the beginning of 2023. From 1 January 2024, platform operators within the scope of the rules in the UK will also need to collect and report information on their sellers to HMRC.
Who it affects
- Platforms: “any software … accessible by users and allowing Sellers to be connected to other users for the provision of Relevant Services”
- Platform Operator: “an Entity that contracts with Sellers to make available all or part of a Platform to such Sellers”
- Relevant Service: Rental of immovable property (e.g. holiday accommodation) or Personal service (e.g. delivery services, passenger transport, tuition)
Requirements
Records that must be kept in respect of each seller
- Name, address, DoB (if an individual)
- UTR/VAT# or equivalent if outside UK
- Company number
- Where the relevant service is that of immoveable property:
- the address of each property
(Exclusions for large sellers, i.e. >2,000 transactions per year)
Deadline: 31 January of year following e.g. report by 31 January 2025 for the year 2024
Penalties: £5,000 for failure to report by the deadline plus £600 per day if remains unreported after an assessment is made
Case study
Sally has recently set up a website to advertise holiday accommodation in her local area of Pembrokeshire. Customers are directed to the individual property owners details, either by linking through to their website or providing other means of contact with them, no bookings are taken through Sally’s website. The vast majority of property owners are small traders who list one or two properties with Sally. She receives commission from the property owners for each referral but does not supply any services to the customer at all.
Sally will be within the reporting requirements. She needs to ensure that she is collecting the data required on the property owners from 1 January 2024 so that she can report these to HMRC by 31 January 2025. If any of the property owners have more than 2,000 transactions with her within the year, then that seller would be excluded from her reporting.
Conclusion
If you operate an app or website that brings together someone providing the services listed above with people wanting those services, then you will need to be able to capture the data on all relevant sellers from 1 January 2024. If you think that all your sellers would be excluded from the reporting, you are still required to notify HMRC that you are a platform, and that exemption applies.
If you would like further details on the requirements, then please contact the VAT team using the button below:
