Individuals selling goods online may face increased tax scrutiny as the government explores funding options for its spending commitments, according to accountants. This potential crackdown could impact sellers on platforms such as eBay and Vinted.
Current regulations already require online marketplaces to report information about users and their selling activities to tax authorities for individuals with more than 30 transactions annually or those earning over £1,700 on platforms like Vinted. However, accountants suggest that even more rigorous rules might be introduced.
These potential changes are linked to the government's plan to implement a 20% cut in business rates for pubs, social clubs, and music venues. While the government initially stated this would be funded by reviewing relief for businesses deemed not to contribute positively to local communities, such as vape shops, there are concerns that online sellers could face further measures.
Lee Murphy, managing director at The Accountancy Partnership, indicated that the burden might shift to the major online platforms, leading to noticeable changes for sellers. He anticipates moves towards greater transparency, aiming to reduce the need for the tax authority, HMRC, to pursue individual sellers directly. This could involve more stringent identity verification processes for sellers, potentially including the collection of National Insurance numbers or unique taxpayer references, similar to practices already seen on platforms like Amazon.
Murphy also suggested that marketplaces might be asked to verify if sellers are VAT registered, enabling checks against HMRC records. Sellers approaching the VAT registration threshold could be notified of their obligations, increasing platform accountability while placing the ultimate responsibility on the sellers themselves.
However, most casual sellers are unlikely to be significantly affected. Individuals earning less than £1,000 per year from online sales are generally not required to pay tax or declare their income due to the Trading Allowance. The rules are primarily aimed at more prolific sellers who could be classified as traders, depending on the frequency and profitability of their sales. Selling secondhand items, such as used clothing or books, after a clear-out typically does not fall under these stricter trading classifications.