Ebay sellers and holiday lets face massive tax crackdown
ONLINE sellers who use eBay, holiday letting websites and other internet retailers will face one of the “biggest tax crackdowns in history” under government plans to obtain details of millions of online transactions.
HMRC wants to collect “bulk” information from internet companies to target thousands of people who fail to declare income they make online, costing the taxman billions of pounds every year.
The new powers will give the taxman access to PayPal – the online payment company owned by eBay – smartphone app stores run by Apple and Google, holiday comparison websites and a host of other online retailers.
It means that thousands of Britons who let out their homes on the internet or sell goods on eBay will be targeted and have their affairs scrutinised.
According to a consultation published by HMRC, the taxman will be able to use the powers to collect the names, addresses and revenues of any businesses that use the websites. They will then compare the information with tax returns filed by the businesses and use it to pursue those who have failed to pay. Senior tax accountants told The
Daily Telegraph that the scale of the data collection was “huge” and amounted to a “radical” change in the way that HMRC conducted its business.
They warned that it may lead to “fishing expeditions” that could see small businesses and modest hobbyists sent “frightening” letters demanding payment
of taxes which they do not owe. In the past, some people who run businesses which make as little as £100 profit a year have been contacted by HMRC over unpaid tax.
The accountants also raised concerns about the ability of HMRC to handle so much information and warned that the “huge” databases will have significant security and privacy risks. HMRC has insisted that it will only collect data about businesses that use the internet to sell goods and services rather than those who are buying.
Rebecca Reading, a corporate tax partner at Barker Tilly, said: “It seems to me that this is a massive exponential growth of data between something we’re all familiar with, such as collecting interest on bank accounts and savings accounts, to millions of online transactions.” The new legislation will cover electronic payments alongside price comparison websites for everything from holidays to insurance and takeaways. Popular websites include Booking. com, Airbnb and Just Eat. The move will raise £860million over the next five years, according to Treasury forecasts. The new law is likely to come into force next year.
Many of the websites are used by middle-class professionals who set up small businesses on the websites to bolster their income. Professionals also use websites such as Airbnb to rent out their homes to tourists.
However small, any earnings above an individual’s tax-free personal allowance – £10,600 for the 2015-16 tax year – are taxable if the money made is considered a business profit. There are also concerns about how HMRC will cope with so much data. Mrs Reading said: “After HMRC lost a lot of customer data around 10 years ago, they shied away from this mass data collection because they were afraid of whether they could protect it. This seems to be going back towards massive access to data.”
A spokesman for Ebay said: “If you are just selling unwanted items for spare cash, then you may not need to worry about tax. If you are buying or selling an item with a view to making a profit, then you may be liable to pay tax on any profits you make and you may need to account for VAT on your activity.”
An HMRC spokesman said: “We want businesses to pay their fair share and ensure legitimate traders are not left struggling to compete against tax cheats. The information will only be used to identify businesses that are breaking the law by evading paying the tax they owe.”