First; this procedure is part of an OECD initiative and agreement that is an effort to identify digital movement of currency which has been obtained by criminal means, especially across national boundaries. Tax evasion is only one of these; add to it people trafficking, drugs, child exploitation, and a host of other fraudulent and criminal activities. It is nothing to do with a specific purge by HMRC, eBay or the government, other than the UK is a member and a signatory, along with the other 35+ members of the OECD, to this initiative.
Nevertheless; just take your statement "Both eBay and HMRC should know if a person is a business or private seller. This means looking at their sales, personal private sales will be obvious as oppose to business sales or bulk produced items of a similar sort." - and just how do you propose they do this, check every sellers account to see what they are selling, what type of product, what quantities? There are millions of account holders on eBay. It would be an impossible job to physically do this. And eBay is only one selling platform - many people sell across numerous sites.
This method allows HMRC to link income from any digital platform to an individual NINO. The Connect computer system at HMRC can then flag any anomalies for further investigation. This is not being done to just target people not declaring an income but also to verify that businesses are declaring their correct income on their tax returns. What used to take an HMRC inspector weeks to carry out can now be done in seconds.
I would add that your response in post 601 "If you are running a business these are allowable expenses, that come off your profit, so not sales at all but expenses." This response was to a private seller - a private seller cannot claim expenses if subsequently found to have been guilty of not declaring an income. Neither are expenses allowed to be offset if someone is using HMRC's Trading Allowance; this is determined on the total income received - not profit.
Do eBay care whether a seller is correctly registered as a business? Of course not, unless the seller is at the level for VAT registration and not registered with their VAT number; an area where eBay are financially liable for such misdemeanours. eBay will never monitor their site effectively unless it is in an area where they are held financially accountable. Not providing a NINO of a seller who meets the selling criteria is one of those areas where eBay can be liable to a financial penalty if they cannot demonstrate that they have carried out due diligence to obtain it. The withholding of funds is one of the measures they can use to coerce members into providing it whilst demonstrating to HMRC they have met their due diligence requirements to provide it..
Although I am sure that well over 90% of members use eBay legally and within eBay's policies and terms and conditions; a sizeable number ignore UK laws and eBay policies either knowingly with impunity, or through ignorance; especially selling part filled bottles of perfume, particularly as 'new'.
