The Government has released a policy paper outlining its intention to consult in summer 2021 on the implementation of new rules that will require digital platforms to collect and send information about the income generated by platform sellers, amongst other things, to both HMRC and the sellers themselves. HMRC will then exchange the information with other participating tax authorities in jurisdictions where the sellers are tax resident. Following this initial consultation and a subsequent review of the detailed proposed rules, the intention is to implement the measure from 2023 with reporting commencing in 2024.
Stuart Halstead, EY’s Gig and Sharing Economy indirect tax lead, commented:
“This measure will affect digital platforms in the UK that facilitate the provision of services including apps and websites which supply services such as the provision of taxi and private hire services, food delivery services, freelance work and the letting of short-term accommodation. There is also an indication that this could subsequently be applied to digital platforms supplying goods. The powers announced in today’s Budget means that the UK will be able to implement new rules via secondary legislation following consultation.
“HMRC already holds the power to access the data collected by UK-based platform operators. However, prompted by the publication in 2020 of the OECD’s Model Rules for Reporting by Platform Operators in 2020, through these new measures HMRC is essentially adopting an internationally agreed mandatory data collection standard and, more importantly, signing up to the periodic exchange of information collected with its international counterparts - many of whom have already or are in the process of adopting these protocols.
“If implemented, this measure will have a significant impact for UK digital platform businesses who will have to collect and verify information about sellers, which many platforms do not currently collect. The measure will also affect businesses which provide their services via digital platforms. Overall we are likely to see the enhanced scrutiny of the tax affairs of platform participants as a result of these moves both in the UK and overseas.
“This specific measure, prompted by the publication of OECD’s Model Rules for Reporting by Platform Operators in 2020, is topical given the recent Supreme Court decision in the ride hailing app case and the recent HM Treasury Call for Evidence on VAT and the Sharing Economy.”
Stuart concluded: “Digital platforms represent a growing segment of the modern economy which does not sit squarely within current tax administration frameworks. It would appear that Tax Authorities in the UK and elsewhere are increasingly looking to address that challenge.”