From 1 January 2024, digital platform reporting to HMRC became a legal obligation for many platform operators. Therefore, if you're running a digital platform connecting buyers and sellers in the UK, understanding your responsibilities is vital. What's more, if you fail to comply you could face serious penalties.
What is a digital platform?
A digital platform is an app or website that connects people looking to buy and sell goods or services. Popular examples include Airbnb, eBay, Uber, Just Eat, and Booking.com. Crucially, if the platform has the ability to track or verify payments to sellers, then it falls within the scope of HMRC's rules.
However, a website with listings, software that processes payments, or one that is an advertising board is not considered a digital platform by HMRC. Furthermore, neither do platforms that only collate or display data without enabling transactions fall within these rules.
Digital platform operators who facilitate the sale of certain ‘Relevant Activities’ must register and report their sellers details to HMRC.
Why are these rules being introduced?
The UK is implementing this in line with the OECD’s model. The aim is to improve transparency and clamp down on cross-border tax evasion. As a result platform operators must collect key seller information and report it by 31 January following each calendar year.
Those Digital Platform Operators operating in non-UK territories will need to check local rules as this is an OECD initiative.
Who must report?
You must report if you are a Reporting Platform Operator (RPO) based in the UK — or if your platform is managed under UK law or has a place of management here. Additionally you must facilitate the sale of certain ‘Relevant Activities’ which are detailed below
The key test is whether the service is capable of being personalised. However, if only elements of the service qualify as a personal service, the whole service is reportable. Although where the personal service element is purely ancillary to the non-reportable element of the service is is not reportable.
What are relevant activities
A service is not a ‘personal service’, if a Seller provides a service under an employment contract with a platform operator (or related entity). Furthermore, whether the Seller is providing a service as an employee of the PO (or a related entity) has to be determined on the facts and the relevant employment law in the UK. Some examples of a personal service carried out at the request of a user (customer) include the following:
Excluded activities
However, the following activities are excluded from HMRC's reporting rules:
Additionally, those' Excluded platform operators’ who don't permit sellers to profit from received payments or have no reportable sellers must also register and report their own details to HMRC
Reporting to HMRC
Firstly, the RPO must first register with HMRC, via their online facility The platform is then required to report details of sellers who are actively supplying and being paid for goods or services on its platform .
Platforms are not required to report' Excluded sellers': typically these are businesses that are reckoned to be low risk from an HMRC compliance perspective.
The reportable data on sellers that the RPO is obliged to disclose to HMRC is set out here.
An operator cannot report details to HMRC without obtaining sellers' details. A reporting platform operator has until the end of its second year of operations to complete due diligence for pre-existing sellers. These are sellers who were registered on the platform before the start of the reporting obligation.
If sellers do not co-operate, HMRC suggests that the RPO considers limiting their access or preventing registration on the platform
Reporting Platform Operators (RPOs) can elect to carry out due diligence only on Sellers that are active. Where an RPO decides to start performing due diligence on all Sellers, including inactive Sellers, it needs to inform HMRC that it is withdrawing the election. The withdrawal has effect from the following Reportable Period.
A RPO can notify HMRC if it considers that it is an Excluded platform operator (EP0). Although there is a strict reporting time frame for notification
Penalties for non-compliance
Failure to comply to these reporting requirements could prove costly as the following penalties apply:
Summary
Digital platform reporting to HMRC is no longer merely optional. Therefore if your platform supports Relevant Activities, you must register, gather seller information, and file a complete report by the end of January each year.
Furthermore if you're an online seller who doesn't comply with the RPO's reporting requirements this could result in lost revenue and compromise the profitability of your business
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