In October 2022, HMRC published the draft regulations which, when finalised, will bring data sharing into effect for the gig economy. This is the latest step in a global move towards cross-border data sharing and transparency which started with the Common Reporting Standard (CRS), to help tax authorities ensure that all individuals and businesses income is correctly declared and taxed.
Digital platform transparency
In 2020, the OECD published the rules requiring digital platforms (online marketplaces like eBay and Amazon) to collect information on the income realised by those offering accommodation, transport and personal services through their platforms and to report that information to local tax authorities. Its standardised data exchange schema was published in March 2022. HMRC is now working towards implementing these rules in the UK, although it is also expanding their scope to include the sale of goods.
Once the UK regulations are made in early 2023, the clock will start ticking for both platform operators and users. Platforms will be expected to familiarise themselves with the new rules and penalties for non-compliance before collecting information from 1 January 2024. The first reports will need to be submitted to HMRC by 31 January 2025.
After January 2025, HMRC will be able to share data on non-UK users with other tax authorities who also adopted the OECD’s rules. The OECD has recently announced that as well as the UK, the following countries have signed up to exchange information from digital platforms: Argentina, Belgium, Bulgaria, Canada, Colombia, Costa Rica, Cyprus, Estonia, Finland, Iceland, Ireland, Latvia, Luxembourg, Malta, the Netherlands, New Zealand, Norway, Poland, Portugal, the Slovak Republic, Slovenia and Spain.
Impact on taxpayers
The model rules helpfully go further than the CRS. They are designed to help individuals and businesses in preparing their tax returns by providing them with a statement of the amount earned through the platforms, as well as any fees, commissions and taxes paid or withheld by platform operators. The users will, therefore, know what data the platform is sharing (i.e. the data that HMRC will see) albeit on a calendar year basis.
Those selling goods and providing services through digital platforms therefore have some time now to check whether they understand what income/gains they need to declare and what UK tax they need to pay.
Getting your taxes up to date
Anyone working in the gig economy who is concerned that they failed to correctly declare their UK taxes in the past should take steps to correct this now by making a disclosure to HMRC. Please contact BDO for specialist advice on how best to approach HMRC to agree any tax, interest and penalties due as well as registering to file tax returns for subsequent years.