HMRC TAX REPORTING

[skyes-emporium]

In an eBay notification regarding HMRC tax reporting it states that

Required reporting should only affect newley registered accounts in 2024 and all accounts in 2025 who pass either of the threshholds.

Am I to understand that accounts registered prior to 2024 are not subject to this reporting until 2025 if thresholds passed?

[papso22]

I believe this to be an ebay misinterpretation of the actual regulations.  There is no way the regulations envisage some sort of amnesty for established accounts.

It has been raised with them.

[ett1954]

@papso22  I suspect the following statement from eBay is causing the confusion: "Required UK digital sales reporting should only affect newly registered accounts in 2024 and all accounts in 2025 who pass either of the below calendar year sales thresholds on eBay"

This appears to be a combination of poor use of the English language combined with a lack of understanding of how the UK tax system works resulting in typical ambiguity found on many statements they release.

HMRC have requested sales data from 1st January 2024 (to be reported before January 31st 2025).  This period includes the last three months of UK tax year 23/24.  If a seller in the UK exceeds the 30 sales or £1700 amount in these three months to April 6th HMRC will be looking at the 23/24 tax year and if they found concerns they would be duty bound to request data from eBay prior to this date (they have always had that authority).

It appears to me that eBay have copied and pasted this statement from that put out to most of the other countries in this scheme whose tax years run from January to December.  For example if this statement was changed to say Germany, Italy, Spain, France or Belgium (I could go on) instead of UK it would be correct.

As such, I suspect someone with no knowledge of how the UK tax system works has copied and pasted a generic statement for other countries and added UK in place of another country.  Due to this eBay is not only causing confusion it is, I believe, misleading.  I would suggest if anyone has concerns, or is having difficulty understanding the process that they go to the HMRC website.  If they still cannot get to grips with it speak to HMRC or your accountant or financial advisor.

[papso22]

I think it's simpler than that.  The regulations require the reporting to cover accounts registered in 2023. Ebay have taken that to mean new accounts first registered in 2023 but that gives an absurd result.

Clearly it's meant to cover all registered accounts that trade over the thresholds in 2023.  I.e new ones and ones registered prior to 2023 and still active.

Any other interpretation by ebay is nonsense.

[sheba-knows-best]

I must admit I mused on this wording for a long while.

I took it as HMRC trying to cop out of a load of work.

So basically they will look at all accounts from Jan 1 2024 to 1 Jan 2025. Meaning anyone who continues as they are - without reporting tax burden - will get spotted and pulled up and yes, then, they might be investigated for previous years.

However should sellers who have not not paying tax, shut up shop now, - so not sell in 2024 - then, yes, it is a kind of amnesty, as they will not get spotted so will get away with everything up to now.

I could well be wrong. I didn't know what to think. I just suspected that HMRC didn't want to start trawling through literally hundreds and thousands of accounts for a few quid - so gave people a chance to slink away and save them (HMRC) more bother than it is worth.

Even if this were the case, if it gets rid of these people, it's job done in my eyes.

[papso22]

Only it's not an HMRC regulation, the requirements come from the model rules that apply to all participating countries.  HMRC can't amend those to suit themselves.

Sellers who stop selling because of the new reporting regulations will not be reported in Jan 2025, but they may already be on HMRC's radar.  I agree that stopping law breakers from selling is a good result.

Ebay's interpretation would mean all those established sellers that are meant to be reported in Jan 25 won't be because they registered their accounts prior to 1st Jan 24.  That cannot be right. 

[theelench]

Isn't there going to be an awful lot of confusion in 2025?

Assuming that the unregistered business problem is anything like as large as it's said to be on ebay, there will be thousands(?) of HMRC letters being sent out.  

At least some of the recipients will, rightly or wrongly, deny that they're Trading,  HMRC will have to look into these and decide whether self-assessment forms are required or not?

Speaking to a friend last weekend who is both a retired accountant and an ex-ebay seller, he was adamant that just because the reporting rules have changed does not mean that HMRC can just demand what it thinks is tax due, without allowing for the expenses that were allowable at that time, which most non-business sellers won't have.

He was also of the opinion that, although the result might clean-up ebay and rid it (temporarily) of unregistered businesses.  It would be an expensive way of getting a one-off windfall tax.  Some of the real crooks would be caught, but be back when they've found new ways to carry-on defrauding HMRC.

Many more inadvertent tax-dodgers would also be caught-out, pay up and cease trading altogether and (his opinion) just as many would successfully appeal any tax assessment.

So '25-'26 might yield some extra tax collected, but there would be little gain after the first year or two.  In his words "another govt. I.T project that costs the tax-payer a load of money with minimal results and gains".

???????  

[ett1954]

@theelench  "retired accountant" ........... "another govt. I.T project that costs the tax-payer a load of money with minimal results and gains".

Obviously out of touch as well as this isn't a government IT project but an international initiative to which the UK have signed up to along with over 30 other countries.

This is the digital age when enormous amounts of data can be processed in the blink of an eye.  It will become increasingly difficult to find new ways to avoid or evade tax; especially as digital platforms become further regulated and may be considered complict and liable in any such actions.

[theelench]

Did I mis-quote or mis-understand what I've read several times on threads on the subject when I mentioned to him that HMRC had developed a new computer system, invested £28M(?) and had already allocated some staff to this measure?

I may have inadvertently mis-lead him as he is out of touch with ebay, but in the real world he is far from it 🙂 

[ett1954]

@theelench   I am not trying to pick an argument here but to try and present information accurately, and I apologise if that is how it came across to you.  Decyphering correct information from media hype and people grasping the wrong end of the stick is not easy.

Obviously information is difficult to come by on the internal mechanisms of HMRC, however as I understand it, the £28m was for software development to allow this information to be integrated into their existing Connect system which was developed in 2010 and to also integrate with the other countries in this initiative.  The staff increase was, I believe, an additional number of staff to that currently using the Connect system.

The Connect system cost approximately £100m to develop and is used to link information from virtually anywhere to identify potential areas of undeclared tax.  In this it has been extremely successful and in 2020 it was reported that £3bn additional tax revenue had been recovered.  However it is calculated that there is still a wide discrepancy on what the economy should be generating in tax and what is being paid.  The system identifies instances of potential tax avoidance, evasion, criminality and much more, and currently 150+ analysts are employed in using the system. 

Investigations that once might have taken weeks or even months to conduct can be carried out in a day, and sometimes in just minutes.  Many investigations prior to Connect would probably not have been launched because of the cost and complexity of putting together the data for analysis.

Whether anyone likes it or not, this is the world we live in.  I doubt whether these new rules will have an impact of the majority of sellers on eBay however there are probably a few that are not sleeping too well at the moment.  In any situation like this it is the "low hanging fruit" that will be picked first to give the greatest return on investment.

[papso22]

---

@papso22 wrote:

I think it's simpler than that.  The regulations require the reporting to cover accounts registered in 2023. Ebay have taken that to mean new accounts first registered in 2023 but that gives an absurd result.

Clearly it's meant to cover all registered accounts that trade over the thresholds in 2023.  I.e new ones and ones registered prior to 2023 and still active.

Any other interpretation by ebay is nonsense.

---

For every mention in my post of 2023, please substitute 2024!  I can't keep up 😞

[magpiecorner1]

Probably the most sensible post I have read on this whole subject!

Please ask your friend if the danger of the Government actually losing tax is also an option?

I'll give you a scenario - glass collector of many years standing, has travelled to fairs in the UK in Europe buying pieces of glass, he frequently sells in order to buy better pieces, sells many pieces for a profit and some for a loss.  Its a great hobby and has always had investment potential - and now is worth many thousands.  Last year, 2024, he sold 40 items for £11,000.  He was instructed by HMRC to register as self employed and for self assessment for the following tax year.  2025 has been and gone He has sold 50 items on ebay in 2024/25 tax year for £14,000.  Incidently he had only bought only £11,000 of items, hasn't seen anything worth buying but he has cash to go shopping, which I think would create a gross profit of £3000.   But now he can put his glass items into his business as stock before selling (at what price, presumabley market value?) he has just bought a new car and put that into his business, as well as a new computer and printer, and he can depreciate those items, including stock every year.  He also adds all other allowable expenses, a portion of the car running costs, a portion of heating and lighting, and of course all the stationery costs etc etc etc.  He makes a loss (not difficult, its a nice car!).  But not to worry, he can now do something called 'sideways relief' and offset these new business losses against the taxable income he has.  Shall we even say he is a retired accountant and is in the higher tax bands?  So this business he is forced into now saves him tax!  

To boot, there was a time that he wouldn't be able to do this as HMRC, badges of trade included  the 'intention to make a profit' and, although 'sideways relief' is a perfectly normal part of tax, if someone made a loss every year HMRC tended to question whether or not it is indeed a business and whether or not he should be regisitered.

I would be most interested to hear his comments, not expecting to get this all correct but I once spent a very good afternoon with a tax inspector trying to persuade him that my accountant's suggestion that I calculate my car allowance as 50% was quite unfair.  At the time I was dealing with the Coastguard, fitting out building all over Scotland - got an agreement for 95%.  And a very good lesson in what 'allowable expenses' are!

[theelench]

I didn't think you were being argumentative, so no apology needed.  I may well have miss-understood what I've read, I'm now retired and all my income is PAYE so I take little interest in news stories about HMRC and their systems.  That is, until something like this comes up.

Like many other private sellers, I'm also trying to sort out in my mind what is accurate information, what is guess-work (but likely to be correct and affect me in some way) and what is alarming sensationalism or even wishful thinking by some posters.  My friend may be out of touch, but I'm sure takes more interest in Tax related news than I do. 

I take your point that the "Connect" system has been in use for years, although I'd never heard about it, but the govt. has also made head-lines a few times after spending millions on new systems or upgrades that have turned out to be wasted money because they don't work properly.

I and my friend at least have had past experience of the Tax system beyond PAYE, so have some idea of what these new rules mean.  But I do think that for some private sellers who have never dealt with HMRC further than a PAYE Notice of Coding or P45, never needed to present "books" or file a Self Assessment Return, there will inevitably be confusion.  To my mind that will largely depend on how HMRC goes about its "first contact" with such people.

[theelench]

We get together regularly to catch-up and go through various interests in common until we find something to talk about in greater depth.  Ebay usually comes up, but isn't often one of the subjects that is mulled over in detail.  I mentioned the new reporting rules and Collectables (he sold off one of his collections on ebay) and without going into any great detail gave me his opinion that it would be "a can of worms" leading to more work for HMRC, than it was worth in all but a few cases.  (By Collectables we understood it to mean items like my glass, not the type of collectable like stamps / postcards / CDs etc where a trader could amass huge numbers in a relatively small space)

We didn't get anywhere near such things as "Sideways Relief" or that HMRC could actually end up worse off by deciding that someone was Trading when they maintained that they were not.

But I did get as far as someone that HMRC deemed to be trading, because they couldn't prove how long they had ownership of their collection, would then be entitled to treat the collection as "Stock" with any tax allowances that entailed.  (See Seller Central:  "Are Your Taxes In Order...." post # 145.)

Your scenario is probably more accurate than my opinion as, being a business you're more aware of the allowable expenses involved.

As this develops we will, I'm sure, discuss it at greater length and in more detail and if relevant I will mention what he says.  One thing I do know is that I had no trouble doing my books and Tax Returns until Making Tax Digital came along.  After that my annual struggle to get through Government Gateway to fill in the return made me doubt my sanity at times.  I have no desire to to start all that again and will most likely stop selling rather than start that again.