Previously, we mentioned that HMRC has started investigating sellers’ income information on major online selling platforms this year to combat tax evasion.
All online sellers and part-time workers must declare and pay taxes to HMRC once they exceed the tax-free threshold.
Given that the new regulations are now in effect, any behavior identified by HMRC as tax evasion will be severely punished.
Platforms and Sellers Affected
Currently, HMRC has access to sellers’ information on online platforms and collects their sales data.
This includes platforms such as Etsy, Vinted, eBay, as well as media platforms like Instagram and OnlyFans, which need to collect sales and income information from sellers and influencers to share with HMRC.
Additionally, platforms providing services such as Uber, Deliveroo, and Airbnb must also share data for any services receiving payments.
So far, online sellers have faced strict internal scrutiny by HMRC and entered into tax investigations.
Submitting Tax Returns
Since HMRC requested all sellers’ sales records from online e-commerce platforms, income from online sales will be fully exposed.
This means that all sales data becomes extremely transparent, and you need to understand everything about income tax reporting to avoid triggering a tax investigation.
For individual online sellers, if annual sales exceed £90,000, additional VAT registration is required.
If you are an online media person and receive “gifts” from fans or brands, it counts as income, with the same registration threshold applying.
When to File Tax Returns
Under existing rules, you need to file a return if you meet one of the following conditions:
- You sell 30 or more items per year;
- Your income exceeds the £1,000 threshold for taxable income.
If any of these conditions apply and you are trading, not just selling your second-hand clothes, you must submit a tax return.
Penalties
Firstly, once HMRC initiates a tax investigation into the store, it requests all online sales data and tax evidence. HMRC has the authority to request that the platform close the store until evidence is provided.
Secondly, during the tax investigation, online selling platforms have “joint responsibility” and are required to cooperate in providing all seller information.
When HMRC confirms tax evasion by the store, it will face a penalty of 100% of the tax owed.
Serious cases will also face prosecution and unlimited fines.
