HMRC is setting its sights on the taxation of online activities which generate revenue. This is part of a wider campaign incorporating multiple countries and online platforms to streamline the collection of additional tax from activities which have previously been ignored.
The new HMRC campaign will see more than 2000 ‘nudge’ letters sent out to people who engage in online sales or who post regularly as a means of generating an income. The letters are to inform people living in the UK and engaging in these activities that profits from such online activities are taxable and that people should make use of HMRC’s Digital Disclosure facility to remain compliant with current and future tax laws.
How do they know who to target?
HMRC has been working with several key online platforms, which facilitate such activities and they have managed to identify a number of persons of interest. The letters are specifically targeted to individuals who it is believed have earned more than £12,500 from online activities in order to educate them as to their tax obligations.
According to HMRC sources, this is simply a gentle nudge exercise in education prior to a new, more comprehensive transaction reporting system going live.
Regulations requiring internet platforms to report on the transactions made through their website will be published by HMRC later this year. The OECD has organised a global programme for tax authorities to share information on internet trading, and platforms will begin to report to HMRC for the 2024 tax year.
What are your obligations?
If you are a UK resident and make a profit from online activity such as selling goods online then the profit is taxable and must be reported to HMRC via a tax return form. Declaring income from online sales and creating content to be used online are all covered by this new initiative and should be declared, even if such activities are not your main source of income.
What steps should you take?
If you have received a ‘nudge’ letter then the first thing is ‘Don’t Panic’. The first step is to identify what you have reported to HMRC already and what may need to be reported in order to avoid a time-intensive and potentially costly investigation.
The letter itself will advise on how to report such profits but do not rush into anything. It may be best to seek expert advice in order to avoid paying too much tax on your online activities. Alternatively, follow the guidance within the letter and use HMRC’s Digital Disclosure facility. If the process seems complex then please do seek out advice from a reputable source such as your accountant – or an accountant with expertise in this area.
If you would like expert advice on this tax matter or indeed any other matter our team of specialist accountants will be happy to help. Simply call 01253 600 150 or email email@example.com and we will be happy to talk to you about your tax concerns.
Matt Connelly is Danbro’s Digital Marketing Executive and produces regular content, including articles and newsletters for the Danbro Group and our subsidiaries.
His background is in B2B marketing and business growth with a strong focus on optimising software to maximise marketing and sales activities.
Since becoming a dad a couple of years ago, Matt’s other hobbies have had to be side-lined due to having to focus on far more important matters… such as keeping a toddler entertained!