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Feb 5 2024

What are the digital platform reporting rules?

As of 1^st January 2024, new rules have come into effect for digital platforms in the UK to start collecting data on how much money users earn by selling goods and services on their platforms. The platforms must also start reporting the information they collect to HMRC from January 2025. In this guide we’ll be exploring the new rules in more detail and what that could mean for individuals who potentially use platforms like Etsy, Airbnb, and Uber as a side project.

What is a digital platform?

Before we discuss the new reporting rules for digital platforms, we first should clarify what a digital platform is. In this case it can be defined as a website or application that enables transactions between people who are selling products or services and customers who purchase them. This does not necessarily mean that the platform has to facilitate payments in the transactions to fit the definition of a platform. Software can also be considered as a digital platform if it meets certain criteria including:

Users can access it and it allows sellers to connect to customers
It facilitates sellers providing goods or services to customers
The payments made to the seller are known or roughly known by the platform operator

A fundamental part of what makes a platform is that registered, third party sellers need to be connected to users using the platform to complete the payment. It’s also important to note that a website, software, or app that is run by a business to only sell its own products or services does not fit the definition of a platform because it doesn’t connect third party sellers to users.

Why are the new digital reporting rules being introduced?

The new rules are in place to minimise the risk and opportunity for tax avoidance in sellers who use digital platforms to sell products or services on a regular basis for their income. For example:

Freelancers
Food delivery networks
Taxi drivers and private hires
Tangible products sold through an online marketplace
Short-term accommodation lettings

This means that anyone earning an income via a digital platform could have their sales data reported to HMRC. However, this won’t include ‘occasional’ sellers who are classed as receiving no more than £2,000 from selling on a platform and making less than 30 sales. So, if you have second hand clothes or household products you want to sell for instance as a one-off, you won’t have to worry about being reported to HMRC.

Do you still need to send a tax return for your earnings?

Yes, if you’re using a digital platform to earn an income, you will still need to submit a tax return. Even though the majority of digital platforms will now have to report your selling data to HMRC, the normal rules surrounding tax returns still apply. If you have any further questions about submitting Self-Assessment tax returns or are concerned about how the new rules might affect you, contact Jan McDermott Chartered Accountants Birkenhead.

Will you be informed if a platform reports to HMRC?

If the platform is reporting your data to HMRC, they are required to provide a copy of the exact information they send to you, so you won’t be left in the dark. However, you should check the dates of the sales that have been reported because platforms will report the data collected based on the calendar year (1^st January – 31^st December), and those who submit a tax return report their finances based on the tax year (6^th April – 5^th April). Therefore, the details you might get from the digital platform may not directly correlate to the information you report on your tax return due to the different reporting times.

HMRC will gather the data reported by each relevant platform and link it to the right taxpayer. This will ensure that you’re paying the correct amount of tax for the sales and earnings you are making. In some cases, a platform may request additional information from you like your UTR number or a document (e.g., your passport) to accurately verify your identity.

Conclusion

For more information regarding the digital platform reporting rules and specific advice contact our team at Jan McDermott Chartered Accountants. Our team has years of experience in accounting for small business, with a clear understanding of how to support businesses with all their accounting needs.