Consultation outcome

Reporting rules for digital platforms: summary of responses

Updated 20 July 2022

Executive summary

Following an announcement at Budget 2021, the government published a consultation in July 2021 on the implementation of the OECD’s (Organisation for Economic Co-operation and Development) Model Reporting Rules for Digital Platforms, which would require platforms to report details of their sellers to tax authorities to help them assist taxpayers and detect and tackle evasion. The consultation invited views on the optional elements and scope of the rules, and also on the practical implementation details, such as the due diligence processes that platforms would have to undertake and how they would report the required information. The consultation also proposed a new penalty regime to enforce the rules.

HMRC received 28 written responses from a wide range of stakeholders. In general, respondents were supportive of the proposals, although there was a range of views on some of the specific questions posed in the consultation.

On the scope of the rules, most respondents supported the objective of minimising burdens on smaller and low risk platforms. However, there were also concerns that exclusions might be exploited, that they would create competitive disadvantages, or that they would undermine the policy objectives of tackling evasion. On further consideration, the government has concluded that the benefits of a relatively low threshold for excluding smaller platforms do not outweigh the increased burdens and uncertainty this would create. The government has therefore decided that the small platform exclusion should not be available.

Respondents were also broadly in favour of extending the scope of the rules to include the sale of goods and transport rental. They agreed that there should be an exclusion for sellers that only sell a few goods occasionally, although some suggested this should be extended to the provision of services. The government will apply the new rules to the sale of goods, as well as services, as this increases the benefits of the rules. It will also adopt the ‘occasional’ seller exclusion to reduce burdens on platforms. This would also align the UK rules with similar reporting rules being introduced by the EU (DAC7). The government agrees with respondents that it is desirable to avoid duplicate reporting under both sets of rules.

Many respondents wanted greater clarity on the interpretation and application of some of the terms used in the OECD rules. The government understands that further explanations are needed so HMRC will work with platforms and other stakeholders to produce detailed clear guidance on the definitions and other terms in the new rules.

Several respondents were concerned about the additional burden and costs on platforms from having to collect the required information from sellers and check that it was correct and up to date. This would be particularly difficult for existing sellers since platforms did not routinely collect some of the required data. Respondents suggested a number of ways in which the due diligence requirements might be minimised, and said they wanted further details on how platforms should verify data. The government recognises that collection and verification will involve additional work for platforms, but is only requiring the minimum amount of data to be collected and verified to enable a seller to be identified and matched. Whilst the government does not propose to set out detailed due diligence processes in regulations, HMRC will be providing guidance on this after discussions with platforms.

Most respondents thought the proposed Government Verification Service (GVS) could be useful in principle to reduce the costs and burden of verifying seller data and avoid problems with asking sellers for sensitive personal details. However, on further consideration, the government has identified a number of limitations in the proposed GVS that would reduce its effectiveness. Further work is needed to understand how these might be overcome, the potential use of GVS for other verification purposes, and the impact on IT delivery. The government will work with stakeholders over a longer period to explore the design of a more effective GVS.

Respondents recommended using various reference numbers as a Tax Identification Number to match sellers with their details held by HMRC. The government will engage with stakeholders to discuss the detailed requirements and will issue further guidance in due course.

Respondents also supported the proposed extension of the reporting deadline in some circumstances and the ability to use a third party service provider or another platform to carry out due diligence checks. The government welcomes this support and will include these optional additions in the new rules.

Views on the method of reporting were mixed with some respondents favouring only reporting by a XML upload whilst others thought greater flexibility was important and that a manual reporting option should be available. The government considers that there are advantages and disadvantages of both methods, and will therefore explore whether a manual reporting service can also be provided if possible, to give platforms a greater choice and minimise the costs and burdens of reporting.

Several respondents had various concerns about the complexity of the reporting obligations and limited time to make changes to their systems and processes. They also wanted clarification on how some items should be reported. The government has announced that the new reporting rules will apply from 1 January 2024, with first reports due in January 2025, which will give platforms more time to prepare. HMRC will also be considering how the reporting process can be simplified as much as possible and will be providing detailed guidance on the reporting requirements.

Many respondents pointed out that platforms already provided sellers with regular information about their income and transactions so it should be possible for them to provide more frequent reports earlier to sellers to help them complete their tax returns or comply with other tax obligations. The government will encourage platforms to do this but will not require platforms to provide more frequent reports to sellers than annually.

Respondents also explained that many sellers found it hard to find out about their tax responsibilities and hence were often unaware of them. They suggested various ways in which key messages to sellers could be given or the information for sellers could be improved. There were concerns that platforms were not in a position to provide tax advice, and that current guidance on gov.uk for sellers was not appropriate. The government will not require all platforms to provide tax information for sellers, but it will engage with stakeholders to consider how any information they provide and the guidance on gov.uk for sellers could be improved to make it more useful.

On penalties, most respondents broadly supported the proposals in the consultation document and thought they were reasonable, proportionate and fair. They made various suggestions about how the penalties might apply in practice. Respondents commented that platforms should not be penalised in some circumstances and several suggested a ‘light touch’ initially. Platforms will be liable to 2 types of penalty: a penalty of up to £100 for each inaccurate, incomplete, unverified sellers record, and an initial penalty of up to £5,000 and a continuing penalty of up to £600/day for failing to report by the 31 January deadline. These penalties would be reduced for a number of mitigating factors so would be lower in practice. Penalties will not be charged if a platform has a reasonable excuse for failing to comply with the rules and platforms will be able to appeal against a penalty.

Several respondents also provided helpful information about the impacts of the new rules and gave details of the types of costs they are likely to incur. The government notes these impacts and will reflect them in a revised impact assessment.

The government is grateful to stakeholders who responded in writing and to those who participated in meetings during and after the consultation for the valuable insight and helpful comments made. As explained in the next steps section, the government will be publishing draft regulations for an 8 week consultation and welcomes comments on them to ensure the legislation works as intended. The regulations are expected to be finalised late this year or early in 2023.

HMRC will also continue to work with platforms and other stakeholders to understand some of the issues raised in the consultation more fully so that views and concerns can be taken into account when developing the IT systems and processes for implementing the new rules. HMRC will also engage with stakeholders to discuss the detailed guidance that will be included in the manual, and how guidance for sellers can be improved.

Introduction

Background

The OECD published the Model Reporting Rules for Digital Platforms in June 2020. The aim of the rules is for digital platforms to report the details and income of individuals or entities selling goods or services (‘sellers’) via the platform to the tax authority of the jurisdiction in which the platform is resident. The information will then be sent to the tax authority where the seller is resident and be used to help taxpayers get their tax right and to detect and tackle tax evasion. Platforms will also provide a copy of the reported information to the seller to help them complete their returns and get their tax right.

The implementation of these rules will improve international cooperation on the exchange of information for tax purposes. It will also allow HMRC to access the information quickly and efficiently to encourage compliance and increase the visibility of transactions. Platforms will benefit from a consistent international reporting regime. At the same time, the rules need to be proportionate and give platforms sufficient time to implement them.

Consultation

At Budget 2021, the government announced that it would consult on the implementation of the OECD Model Rules.

A consultation document was published on 30 July and the consultation period closed on 22 October 2021. The consultation set out the details of the model rules and invited views on the optional elements of them. It also invited comments on the practical application of the rules and any implementation issues.

A total of 28 written responses were received from platforms, advisers, representative bodies and sellers. The main points made are summarised in the responses section below. Meetings were also held with platforms, advisers and representative bodies to discuss some of the issues raised. The government is grateful to those who responded in writing and to those who participated in meetings during and after the consultation.

Most respondents were supportive of the proposals put forward in the consultation document, although opinions varied on some specific issues. Many respondents helpfully explained how their businesses or clients operated and how they thought the rules might affect them. Although they understood the rationale behind implementing the rules, they pointed out that the proposals could create additional burdens and costs for platforms. Respondents also made many useful suggestions about the issues that the government should consider and highlighted the practical difficulties that implementation might create. Many respondents also wanted clarity and further details about a number of areas which were not explained in depth in the consultation document or in the model rules. The government is grateful for the insight and advice that respondents have provided.

Conclusions

After considering the broadly supportive comments made by respondents, the government will implement most of the proposals set out in the consultation document. However, following careful consideration of the responses and impacts, the government has decided not to adopt the optional exclusion for ‘small’ platforms that facilitate the provision of services for total payments of less than €1 million.

The government is also aware that platforms and other stakeholders want greater clarity about the details of the rules and how they will apply in practice. As explained in the Next steps section, the government will be publishing draft regulations, which will give more details on the implementation, for an 8 week ‘technical’ consultation. HMRC will also be drafting detailed guidance and will be working with stakeholders to ensure this covers the questions that they have raised and any other queries they may have.

Implementation date

The new rules will apply from 1 January 2024. This means platforms will be expected to collect information from 1 January 2024, with the first reports due by 31 January 2025.

Responses

Scope and definitions

Question 1 - Do you agree with the government’s proposals on excluding certain platform operators? Please indicate whether you think platforms would make use of the exclusions in practice and what factors might influence these decisions.

There were 19 responses to this question.

Most respondents were comfortable in principle with the proposals to exclude certain low risk platforms, which are optional in the model rules and supported the objective of minimising burdens on small platforms.

Some respondents were not in favour of exclusions. They pointed out that exclusions would create additional administrative challenges for smaller platforms which may be disproportionate to their benefit. Although respondents were generally in favour of small platforms being able to elect to apply the reporting requirements, some pointed out that this would be burdensome, especially if platforms would have to predict every year if they would exceed the threshold.

There were also concerns from some respondents that platforms within scope of the rules could be at a competitive disadvantage if they incurred compliance costs and administrative burdens which excluded platforms would not have to face. A few respondents said exclusions could also result in some sellers switching to smaller platforms that were not subject to the reporting rules, which would increase the risk of tax evasion and undermined the policy objectives of helping sellers get their tax right.

A few respondents thought that the €1m threshold might not be appropriate and should either be lower, or higher, or based on consideration from reportable sellers rather than all sellers. Some respondents suggested that the exemptions should be broadened to include other categories of platforms that they argued present a low compliance risk, such as financial service providers which are already highly regulated, businesses that already report to HMRC, and larger private companies.

A few respondents wanted greater clarity on the definitions used in the rules and scope of the exemptions.

Government response

The government is committed to promoting growth amongst start-ups, which is why the threshold was originally proposed in the consultation. However, on further consideration, the government does not think that a small platform exclusion would be very helpful for small platforms in practice. A threshold adds burdens and uncertainty for platforms as they have to determine whether they fall within it or not. Smaller platforms may rapidly exceed the threshold so benefits may be limited or short term, and platforms would have to be very small to be captured by the exclusion given how low the threshold is. In view of this, and the concerns expressed about the exclusion by respondents, the government has decided that the small platform exclusion would create more burdens than benefits so should not be implemented.

The government is also committed to ensuring the rules are proportionate and risk based. The other 2 exclusions - for platform operators which do not allow sellers to profit from the payments received or which do not have any reportable sellers - ensure that platforms which fall out of the policy intent of the rules do not have to report. The government has therefore decided to include those 2 exclusions in the implementing regulations.

The government will not expand the exclusions to other categories of ‘low risk’ platforms as this is not within the scope of the OECD rules so would undermine the objective of the rules to avoid a patchwork of domestic reporting requirements.

HMRC will be providing detailed guidance on the interpretation of the definitions and exemptions.

Question 2 - Are the definitions on the scope of the model rules sufficiently clear? Are there scenarios not anticipated by the rules where guidance is needed?

There were 21 responses to this question, with all but 2 raising various areas and terms for clarification.

Several respondents wanted clarification about the application of the rules to different business models, for example, a platform selling goods in its own name, or where a platform connects sellers to other users who facilitate interaction with the customer, or where the platform is not involved in the contract between buyer and seller.

There were some concerns that the definition of a platform was very broad and could catch all online retail. Respondents said it was not clear whether business that simply sold goods or services directly to customers on their websites were platforms, or if intra-group transactions/sales were also caught.

Some respondents welcomed further guidance on who would be responsible for reporting and due diligence in cases where multiple platforms were involved in operations, or where a customer is redirected through more than one platform during a transaction.

Several respondents wanted clarity on when ‘relevant services’ were provided, on the treatment of sellers who are employees, and the interaction of the rules with other areas of the tax system.

Respondents also believed that guidance was needed about the seller exclusions with examples of sellers that were included or excluded. They thought it was also not clear whether the threshold was based on the number of transactions made by a seller on a particular platform, or across all platforms that a seller used.

Some respondents thought the definition of consideration may not capture some kinds of income. They also thought it was not clear whether consideration includes sales taxes, VAT, other taxes, and tips, or other payments in connection with providing services (eg repair costs).

Respondents pointed out that a seller’s tax residence may not be the same as their residence based on where they live, and that sellers should also be able to declare their tax residence. They also foresaw problems if platforms have to determine the residence of the seller as they could be resident in more than one jurisdiction in the same year and their tax residence may not align with a reportable calendar year.

A few respondents also wanted clarity on how to determine the number of property rentals, when a sale had to be reported, and how cancellations should be treated.

Government response

The government understands that further explanations and guidance are needed on the details of the new rules. HMRC will work with platforms, advisers and representative bodies to produce guidance on the queries raised in the responses and the rules in general to ensure the guidance is comprehensive, clear and effective.

The guidance will include references to the OECD commentary on the Model Rules and to any Frequently Asked Questions produced by the OECD on the interpretation of the rules where appropriate.

Question 3 – Is any additional guidance needed in light of the government’s plans to adopt the extension of scope in its implementation of the model rules?

There were 17 responses to this question, with all but one raising various areas which needed to be clarified in guidance.

Some respondents were in favour of the extension of scope to include the sale of goods (and also the ‘occasional’ seller exclusion) as this would bring more platforms within the scope of the rules. One respondent did not want the government to adopt the extension and felt that the rules should be targeted at the provision of services only.

A few respondents wanted the ‘occasional’ seller exclusion to also cover small scale providers of services to reduce burdens on these types of sellers and not overwhelm HMRC with low value data. Likewise, a couple of respondents suggested extending the exclusion for large scale providers of property rentals to large scale transport rental providers. A couple of respondents also suggested increasing the ‘occasional’ seller threshold to 100 transactions and 10,000 euros; or not having a limit on the number of relevant activities.

One respondent made the point that excluding ‘occasional’ sellers would not help them comply with their tax obligations, especially if they used more than one platform. Another respondent said that the ‘occasional’ seller exclusion should be optional to avoid the cost of tracking the number and value of sales.

A number of respondents felt that clarification was needed about the ‘occasional’ seller exclusion and how the €2,000 threshold applies.

Government response

As explained in the consultation document, the extension of scope increases the benefits of implementing the rules and broadens the range of sellers which would be helped to comply with their tax obligations. The government has therefore decided to adopt the optional extension of scope to include the sale of goods and transport rental.

The government has also decided to adopt the exclusion for ‘occasional’ sellers of goods where the platform facilitated less than 30 sales and where the seller received no more than €2,000 in a reportable period. This will ensure that platforms do not have to collect, verify and report details of such sellers.

However, the government will not adopt any further exclusions as this is not within the scope of the OECD rules, so would undermine the intention of the rules to ensure consistency and to avoid creating a patchwork of different domestic reporting requirements.

HMRC will provide detailed guidance to address the specific queries raised by respondents, and other questions raised by platforms and stakeholders since the consultation.

Question 4 – Do you have any comments on how you would like the interactions of the model rules and DAC 7 to operate in practice?

There were 17 responses to this question.

Most respondents said that the OECD rules and DAC 7, the EU’s version of the rules, should be aligned as much as possible to achieve consistent reporting and allow UK platforms potentially caught by DAC 7 to report through HMRC. They said this would avoid platforms having to implement different processes and duplicate reporting under both sets of rules, which would reduce administrative burdens and costs particularly for platforms that operated in a number of EU countries. Platforms wanted to report a consistent set of data to one place, with the data then being exchanged with the relevant jurisdictions, rather than having to report to HMRC and an EU member state.

Respondents suggested that definitions, limits and required information should be aligned so that platforms collect, verify and report the same information under both regimes. However, one respondent was concerned that HMRC may seek additional information to align with DAC 7 which would increase costs. Respondents also suggested that differences between how different jurisdictions implement the model rules should be kept to a minimum.

One respondent pointed out that it will be important to have rapid agreement with the EU that the OECD rules are equivalent to DAC 7 so that the EU would allow affected platforms to report to HMRC. Another respondent noted that HMRC should engage with the EU and OECD to minimise any differences, and publish its own guidance as soon as possible, to reduce costs for multinational platforms.

Yet another respondent wanted the relevant exchange agreements between the UK and partner jurisdiction to be announced before the start of the rules so that platforms know what exchange relationships are in place and they can rely on reporting by another platform operator and manage their compliance obligations.

Government response

As set out in the consultation document, one of the reasons for implementing the model rules in the UK is to ensure that businesses are not subject to a patchwork of different reporting requirements around the world. Instead, as far as possible, they will provide consistent information in an internationally agreed format. Respondents supported this approach. The government will therefore align the UK rules closely with the OECD model rules and minimise any differences to reduce burdens on business and prevent duplicate reporting where possible.

The government agrees that platforms reporting under both the OECD rules and DAC 7 should not have to report twice. The government is actively engaging with the EU on this issue with a view to establishing clarity on equivalence as soon as possible.

Due diligence procedures

Question 5 – Do you have any comments on the practical application of the rules on collecting the required information about sellers and rental property?

There were 15 responses to this question.

Several respondents were concerned that collecting and checking the required information would add complexity, cost, and be resource intensive. They pointed out that many platforms may not collect some personal details of sellers such as their address, date of birth and tax identification number (TIN), and that such data was sensitive so some sellers may refuse to provide it. They said it could be challenging for platforms to enforce data collection, and data may be held in different formats, so collection could impose significant costs.

A couple of respondents pointed out that platforms already carry out due diligence on sellers for other business and regulatory reasons, or already report some information about sellers to HMRC. They thought platforms should be able to rely on those checks for the purposes of the rules and should operate on the basis that the information provided by sellers is accurate.

Respondents suggested various ways to minimise the burden of collecting information. For example, platforms could collect information from new sellers only as part of the onboarding process, and review information held for existing sellers. They could also take a risk based approach to obtaining information, mirroring the pre-existing and new accounts models used for other Automatic Exchange of Information (AEOI) regimes.

One respondent pointed out that platforms may not be able to predict which sellers are excluded so they will need to apply the due diligence processes to them as well. They suggested that the ‘occasional’ seller carve out should be optional.

Other respondents were concerned that some of the information about sellers could be used for fraud and identity theft, and could potentially undermine trust in the tax system. They said stringent security measures had to be in place to protect the data and prevent inappropriate access to it by platforms or others.

Respondents also said it would be important to have standard formats for data (eg names, address), especially for sellers using multiple platforms. They suggested the collected information should also identify the appropriate recipient of rental income from jointly owned property and accommodate entities such as Limited Liability Partnerships and trusts.

Government response

The government is committed to ensuring that any additional burdens are proportionate and necessary. This is why the government has ensured that the information to be collected is the minimum that is needed to be able to identify a seller and match them to the information held by HMRC, and platforms will already collect most of it. It is likely that in most cases, the only additional information to be collected is the seller’s TIN and date of birth.

However, the government recognises that collection requirements will create additional burdens and that platforms will incur costs to comply with them. The government will therefore not require any more information to be collected than that specified in the OECD model rules.

The government also recognises that platforms would like clarity on how they should carry out due diligence. While it may not be possible to provide precise guidance on every scenario, HMRC will work closely with platforms to provide as much guidance as possible, including on exactly what information should be collected, how processes could be simplified, and the formats to be used to keep the data as standard as possible and to fit with schema requirements

The government will also expect platforms to put in appropriate safeguards to keep seller data secure to address their concerns and encourage them to provide the required details.

Question 6 – Which number, or combination of numbers, would be appropriate to use as a Tax Identification Number (TIN)? Please give reasons to support your view.

There were 18 responses to this question.

For individuals, there was support for the use of the National Insurance number (NINO), or the unique taxpayer reference (UTR) if a NINO was not available. Some respondents pointed out that some sellers may not have a NINO or UTR, although the number is likely to be very small. Respondents considered the company registration number (CRN) to be most appropriate for companies and other entities.

A few respondents did not support the use of VAT registration numbers (VRNs), given that many sellers are unlikely to be registered for VAT. Others favoured the use of a VRN as it could be verified more easily and VAT registered sellers would be familiar with it.

Several respondents agreed that a Government Verification Service (GVS) code would be helpful and an appropriate alternative to a NINO or UTR to minimise the risk of fraudulent use or hacking. They thought it would also address sellers’ reluctance to provide a NINO or UTR because of their security concerns. A couple thought the use of a GVS generated code to be unnecessary, complex, burdensome and costly.

Some respondents emphasised the need to allow more than one TIN to cover different types of seller population and increase the likelihood of matching to taxpayer records. Others suggested that only one TIN should be collected.

Respondents asked for more guidance about what they should do to ensure a correct TIN is reported particularly in circumstances where the seller on the platform does not have a NINO. They also raised concerns about how to ensure a TIN is provided, and whether the UK reporting rules should make it mandatory for a seller to provide a TIN.

Government response

As explained in the consultation document, platforms will be required to collect a TIN from each seller and must take adequate measures to ensure it is obtained. In line with the Model Rules, the government has decided to require reporting of a VRN, if held by the platform, as this would be helpful for matching purposes.

Successful matching is most likely to be achieved using several different of pieces of information. The government will therefore be considering whether it would be possible for platforms to provide more than one TIN if it is available, subject to the technical requirements of the reporting schema.

The government will not require sellers to provide a TIN but it will engage with businesses in the coming months to discuss how platforms can take appropriate action to collect this information. HMRC will issue guidance on the type of TIN that should be collected, verified and reported.

The government takes data security very seriously, and it would expect platforms to keep details of TINs, as well as other details of sellers, protected and secure.

Question 7 – Do you have any comments on the practical application of the rules for collecting and verifying the data?

There were 16 responses to this question.

In general, respondents commented that the verification obligations were burdensome and challenging, and that the costs and time required to build new processes should not be underestimated. Some respondents were concerned that it would not be possible to verify that every seller’s details are correct, and that platforms would need to operate on the basis that information provided by seller is accurate.

Respondents suggested various ways in which verification could be limited. One respondent suggested that verification should be limited for VAT registered sellers or to that required by Know Your Customer/Anti-Money Laundering procedures. They suggested that due diligence requirements could be aligned with existing regulatory processes or other AEOI regimes. They could also be risk based or limited to using only digital or electronically searchable information.

Several respondents said that further guidance will be needed on how platforms should verify information, how often checks should be carried out, the extent of verification needed to satisfy requirements, and what platforms should do if sellers withhold information. They suggested HMRC should engage with platforms as guidance is being written; and due diligence requirements should be clear and consistent.

A few respondents said that the onus should be on sellers to keep the platform operator updated with any changes to their personal details, rather than requiring platforms to verify the information on a regular basis, or that they should be required to provide information retrospectively.

Respondents were also concerned about verification of a seller’s residence. They commented that this will not always ensure that a seller’s income details will go to the right tax authority. They also did not believe that platforms should be required to determine or verify a seller’s tax residence, which is complex and requires additional information. A couple of respondents pointed out that a seller may be tax resident in more than one country, and that there may be a mismatch between residence for reporting periods and for tax years.

Other respondents raised a number of miscellaneous issues, such as concerns that costs of complying with the collection requirement will be passed on to the seller through increased fees/commission, and TIN verification challenges.

Government response

The government is committed to working with platforms to ensure that verification requirements are practicable and reasonable. In general, the government will expect platforms to use the records they already have available to verify the required information. Whilst it may not be possible to provide precise guidance for every verification scenario due to platforms’ different existing processes, the government will work closely with platforms to enable HMRC to produce as thorough guidance as possible on the expected due diligence procedures. This will set out the overall approach as well as giving examples of how platforms should verify certain details.

The government will also consider how verification requirements can be aligned with other AEOI regimes and regulatory obligations, and welcomes further engagement on this topic with platforms.

The government does not propose introducing any specific obligations on sellers to provide the required information, supplementary documents etc for verification purposes, or to update their details. It expects platforms to make appropriate contractual arrangements with sellers to ensure that they provide the required information and update it when necessary.

The government does not expect platforms to determine a seller’s tax residence as it recognises this can be a complex process requiring specialist knowledge. Platforms should be able to determine a seller’s country of residence based on their primary address. In the vast majority of cases, the seller’s residence based on their address will be the same as their tax residence so information about the seller will be sent to the right tax authority.

Question 8 – Would stakeholders (both sellers and platforms) find a Government Verification Service useful if one was available? Please give reasons for your view.

There were 20 responses to this question.

Most respondents thought that a GVS as proposed in the consultation would be useful for sellers and platforms. They supported a GVS which would ensure that checking the identity/residence of a seller would be as streamlined as possible, and it could also help platforms to submit accurate information. In addition, they noted that a GVS could address concerns that sellers would not want to provide their NINO/UTR, and counter the potential problem of unauthorised access to data and fraudsters obtaining personal data. They also supported a GVS if it could also confirm that a UK seller was registered with HMRC and might enable sellers to register for Self Assessment and Making Tax Digital (MTD). GVS would be useful for sellers who used multiple platforms as they would only have to provide their details once.

However, some respondents had reservations. They were concerned that many gig workers or non-UK sellers would not be verified by the service due to, for example, challenges in proving their identity; or that there would be a lack of any significant demand unless use of GVS was made mandatory. If GVS was not mandatory or not available, respondents were concerned that businesses would have to develop separate systems which would create additional burdens on platforms. There could also be technical and resource challenges to build the connectivity with the service. Some respondents were also concerned about data quality, mismatches and conflicts due to out of date or different data held on HMRC databases.

Several respondents commented on how they thought a GVS should operate. The service should be easy to use, optional, reliable, accessible and capable of dealing with a large volume of data.

A couple of respondents suggested that a GVS should ideally be done at OECD level, or via one type of API, so that specifications would be standardised and it could apply to all participating countries. Another believed that verification could be done by a third party, similar to credit checks.

Government response

The government notes that there were mixed views from respondents about the usefulness of the GVS proposed in the consultation. HMRC has examined the proposed design of the service in more detail, and has identified a number of limitations. Due to data security issues, it is likely that a GVS could only be accessed by sellers, and not platforms. It could also be used only by sellers whose details were already held on HMRC systems so could not be mandatory. This means that platforms would still have to collect and verify details of some sellers, and therefore develop slightly different processes for sellers who used a GVS and those that did not.

However, it is clear that a GVS could help to avoid some sensitivity and security issues arising from sellers having to give their personal details, including a TIN and date of birth, to platforms. It could also avoid the need for platforms to collect, verify and report those details for sellers that can use a GVS. More generally, there is a potential for a GVS to be used for verification of a person’s details for other reporting regimes, or in the context of longer term work on developing a single digital identity. However, detailed design work will need to be carried out to determine what is feasible and deliverable.

Given the potential longer term benefits, the government intends to work closely with platforms and other stakeholders to further explore options for a GVS which would be more useful to platforms and could also be used for other applications. The government welcomes further engagement with platforms on this.

Question 9 – Do you have any comments on the practical application of the rules in relation to the timing, active seller option and third party due diligence requirements?

There were 15 responses to this question covering a broad range of topics.

Several respondents agreed with the extended deadline for due diligence, and thought this should be welcomed by most platforms. Respondents also found the ability for platform operators to rely on due diligence procedures for the previous reportable period to be helpful.

Respondents explained that extracting the data and ensuring it is of good quality and in the right format would be time consuming, so the reporting deadline of 30 days after the end of the reportable period will be challenging if data is not collected and verified at onboarding. They thought clear technical guidance would be helpful, including what platforms should do if data is missing or conflicting.

One representative body was concerned about the timing impact in the UK of having information provided on a calendar year basis and recommended an approach of nudges and prompts to help taxpayers get things right in good time to avoid escalating problems for individual taxpayers.

Many of the respondents agreed that verification and reporting should only be applied to active sellers, and that this option was useful.

Several respondents welcomed proposals for the use of third party providers for due diligence checks since some platforms already rely on them for such services to make onboarding more efficient.

A couple of respondents also welcomed proposals to allow another platform operator to carry out the due diligence, but suggested that HMRC should produce a list of jurisdictions which have ‘substantially similar’ rules to avoid the burden of platforms making this assessment. Others pointed out that such arrangements need to make sure that the seller data is secure, and that sellers are informed of them.

Government response

The government notes that most respondents were content with the proposals set out in the consultation document on the extended deadline for due diligence, application to active sellers, and carrying out of due diligence procedures by third parties or other platform operators. These proposals will be included in the new rules.

HMRC will provide further guidance on due diligence procedures after discussions with platforms about their processes and interaction with the requirements in the rules. The guidance will also explain how platforms can determine which jurisdictions have substantially similar rules so that platforms know which other platform operators they can rely on to carry out any due diligence on their behalf.

Reporting information

Question 10 – What are your views on the government only offering the option to submit reports directly in an XML file format and removing the manual reporting option? Would you use an application programming interface (API) to share info with HMRC if it was available? Please explain your answer.

There were 17 responses to this question. Views were fairly evenly split on whether reports should be submitted in an XML only format, or whether both options should be available.

Several respondents supported the proposal to only allow submission of reports directly in an XML format as this was easier, more secure, and used the benefits of digitisation. A couple of platform respondents said they already used XML to submit data. Respondents also thought it was unlikely that an online business would use manual reporting, and that manual data sharing was costly and inefficient.

Other respondents thought it was important to keep the reporting format flexible and that the manual option should be retained. They said this would allow users to select the least burdensome or costly option for their circumstances and cater for platforms that will not be in a position to submit in an XML format.

Several respondents said a manual reporting option would be better for smaller platforms with few reportable sellers to minimise their costs because the XML format is complex and requires in-house capability or external support. A couple of respondents also pointed out that manual reporting could provide a ‘safety net’ in case of problems with the technology at key deadlines.

Several respondents pointed out that it was important to have the same reporting format for all jurisdictions to ease burdens on platforms that will report to more than one tax authority.

Respondents also suggested that specifications and requirements of the XML format, details of the reporting schema, and any limitations (eg max file size) should be made available as soon as possible and in advance of implementation. System reports on reasons for submission failure or guidance on process in case of failure would be useful.

Government response

The government has carefully considered the advantages and disadvantages of a manual reporting option based on comments from respondents and HMRC’s experience of reporting for other AEOI regimes.

A manual reporting service is easier to use by untrained individuals and requires little or no expertise, so has minimal direct set up costs. On the other hand, a manual service requires an operator to input the data manually, which may incur additional costs and take more time. A manual service is therefore more likely to benefit smaller platforms, particularly if the number of reportable sellers that the platform has is relatively small.

An XML format is technically more complicated and requires more expertise to set up, which could result in higher costs for platforms especially if they have to buy in specialist knowledge. It is quicker and more efficient for submitting larger amounts of data but any errors in the data have to be corrected at the end of the transmission process rather than during it.

As for other AEOI reporting regimes, HMRC will allow reports to be made in an XML format as this will suit most platforms with larger volumes of data to report. However, in view of the comments from respondents on flexibility and the advantages of manual reporting, the government wants to give platforms the choice about how to report. HMRC will explore whether a manual reporting service can also be provided, subject to technical feasibility and other design and delivery considerations. HMRC will confirm whether a manual service will be available, and will issue technical specifications and schema details as soon as possible.

Question 11 – How could platform operators provide information to sellers about their income at an earlier point to make it more useful?

There were 18 responses to this question.

Respondents generally agreed that the mismatch between the calendar year reporting period and the UK tax year creates challenges, with the 31 January reporting deadline being too late to help some sellers complete their return. As a result, they explained it may be difficult to explain or reconcile any inconsistencies in income. They believed annual reporting therefore had limited benefits for some sellers, such as those having to file VAT returns.

Several respondents pointed out that many platforms already provide sellers with monthly statements, or a record of their transactions, and so platforms should therefore be able to provide reports at least quarterly or even monthly. They said that quarterly reports would be consistent with the quarterly analysis of consideration required by the rules; and monthly reports would help with VAT obligations or be useful for corporate sellers with non-calendar quarter years. Respondents suggested that information for sellers should be provided in a user-friendly format, with HMRC ideally providing a template for the required info. They suggested an analysis of sales (eg different types of property income) would be more useful for some sellers, but pointed out that there is no requirement to provide this additional information.

A few respondents didn’t support a requirement to report information earlier than 31 January or to provide quarterly (or more frequent) reports as the reporting deadline is already challenging. Some were concerned that it was not practical for platforms to provide extra information, or that reporting is already time consuming so additional requirements will be burdensome. They said the information might not benefit more established businesses if they don’t rely on the platform to provide it for their own accounting purposes, or be useful to sellers who can already access information about their income, although it could act as a ‘nudge’.

Some respondents said it would be worth considering how the reporting fits in with MTD for Income Tax Self Assessment from April 2024 (which requires quarterly updates), and suggested possibly allowing more time for MTD filing. One respondent commented that basis period reform is likely to make the problem worse as it would affect all tax paying sellers, not just the ones with accounting periods ending January to April. Other respondents suggested changing the tax year to 31 December to fit in with other countries, or aligning the reporting year and tax year.

Government response

The responses indicate that providing more frequent reports or statements of income to sellers would help them to comply with various tax obligations, such as completing income tax, MTD or VAT returns. As many platforms already do this, the government will encourage other platforms to also consider providing such information on a more frequent basis if they can. However, to minimise costs and burdens on platforms, the government will not require platforms to provide information to sellers more frequently than annually.

Platforms should be able to decide what information and format is most useful for their sellers, although they may wish to follow a similar format as the one used for the annual report for consistency and ease. HMRC do not therefore intend to provide a template or to prescribe a specific format for more frequent reports for sellers.

The government will be mindful of other developments that involve reporting of income, such as MTD and basis period reform, but to make the reporting rules consistent with other jurisdictions it does not intend to change the reporting period to fit in with those initiatives.

Question 12 – How can HMRC and platform operators work together to provide appropriate information to sellers to help them understand and comply with their tax obligations? What guidance would sellers find useful?

There were 18 responses to this question.

Respondents explained that currently it is not clear or easy for gig workers to find out about their tax responsibilities, and that small businesses struggle to understand complex compliance obligations. They pointed out that some sellers may therefore be unaware of their tax obligations and that they should be reporting their income, or they may not understand detailed tax rules.

Respondents commented that sellers are more likely to use platforms as a starting point for advice. Several platforms pointed out that they already provide sellers with guidance, information and resources to understand their tax obligations, and direct sellers to further information on gov.uk and/or advise them to get professional advice.

Some respondents said that key messages should go on the statements given to sellers. They suggested data should be presented in clear, user friendly and easily understandable formats so that the seller can easily identify the information they need to comply. HMRC could also provide platforms with standard wording about sellers’ tax obligations.

A few respondents suggested that compelling all platforms to provide relevant tax information for sellers, or signposting sellers to the relevant gov.uk information, would be useful and consistent, but platforms should decide how to do this. Others thought it may be more appropriate for platforms to provide some basic information and direct sellers to a specific gov.uk website for further details.

Some respondents were concerned about platforms providing tax advice to sellers, and possible legal liability if the advice was incorrect. They explained that platforms are not tax advisers, they may not have expertise in tax matters, or be able to provide information about tax rules in other jurisdictions. They said rules on overseas income and assets are complex and platforms should not be expected to provide information about this. Instead, they suggested platforms could encourage sellers to consult an accountant or other reputable tax professional for advice, or they could provide pointers to relevant guidance on gov.uk.

Respondents commented that HMRC have a responsibility to advise and educate sellers, and gov.uk should be the primary source of guidance. However, they said the current guidance is aimed at traditional self-employment, so HMRC should develop better and more tailored guidance for gig workers. Several respondents suggested a dedicated gov.uk website or an online information hub for platform users.

A couple of respondents said that platforms will need to explain why they are collecting and reporting the sellers’ details, and sellers will need to understand what to do with the information provided by the platform and consider their other taxable income. They suggested an advertising and educational campaign early on to raise awareness of the new rules, explain why compliance is important, and to clarify that platforms will be required to collect information from sellers. HMRC should also make it clear on gov.uk that it requires platforms to collect and report seller details and explain how the information will be used.

Government response

The government appreciates that some platforms already provide a lot of useful information to sellers about their tax obligations. It does not propose requiring all platforms to provide tax information to sellers, but it will encourage platforms to consider providing at least some very basic information and appropriate signposts to further details.

HMRC is committed to helping taxpayers get their tax right. HMRC will therefore engage with platforms and advisors on how any information and guidance that platforms provide could be improved to be more useful to sellers and to direct them to further details elsewhere or professional advice as appropriate. However, as the approach platforms take may vary, HMRC does not propose providing standard wording for statements to sellers.

HMRC will consider how relevant guidance on gov.uk could be more useful for gig workers and platform users. This will include exploring whether it would be possible to have a new dedicated ‘landing page’ for sellers with appropriate links to other guidance that might be relevant for them. HMRC will also provide new guidance for sellers to explain the new reporting rules, why platforms will be required to collect, check and report seller details, and how the reported information will be used.

Question 13 – Do you have any comments on the practical application of the rules relating to the reporting requirements?

There were 11 responses to this question. Respondents made various comments on the reporting requirements in general.

Respondents urged HMRC to work to timescales that consider the complexity of implementation and time taken for platforms to make the necessary changes to systems and processes, and said that a clear timetable and requirements should be set out in advance.

A couple of respondents thought the registration, nil return submission, exclusion election and notification of transfer of reporting obligations might be burdensome, and suggested that these processes should be as simple as possible.

Several respondents wanted further clarification on the consideration to be reported, how refunds and discounts should be treated, and how different currencies and cryptocurrencies should be converted and reported. They also wanted guidance on how any mismatches between the seller’s reported and declared income would be handled.

Some respondents raised concerns about the potential risk of double reporting, as the proposals did not appear to apply to platforms that had 2 or more platform operators in the UK. A concern was also raised that the new rules would undermine the onus on taxpayers to declare their income.

Government response

The new rules will apply from 1 January 2024 with the first reports being due in January 2025. This will give platforms a sufficiently long lead-in time to develop the process and systems needed to comply with the new reporting requirements.

As part of its development of the new reporting service, HMRC will be considering how the design of the new registration and reporting processes can be simplified as much as possible to minimise administrative burdens on platforms, whilst still complying with the OECD rules and technical specifications of the reporting schema.

HMRC will be providing guidance for sellers about the new rules. This guidance could also explain that sellers remain responsible for declaring their income to HMRC and what they should do with the information they receive from platforms.

HMRC will also be producing detailed guidance on the reporting requirements once the operational and technical details of the registration and reporting processes have been finalised. This will include clarification on how the relevant definitions in the OECD rules and legislation should be interpreted, and how the requirements should be applied in practice. The guidance will also specifically address the questions raised by respondents.

The government wants to provide flexibility and considers that platforms should be able to nominate another platform operator to assume the reporting obligations on its behalf. This nomination will be included as part of the registration and reporting process so that HMRC is notified of the arrangements and that any penalties for failing to comply with the reporting requirements are charged on the appropriate reporting platform operator.

Administration and enforcement

Question 14 - Does the proposed penalty approach meet the government’s objectives of being reasonable, proportionate and effective in ensuring compliance with the model rules?

There were 16 responses to this question. Some respondents remarked that it was difficult to comment without further details or knowing the amount of the proposed penalties.

In general, respondents recognised the need for an effective penalty regime and thought the proposed penalty approach met the objectives. They agreed that penalties needed to be high enough to encourage compliance and accurate reporting but should be simple and understandable, and take various circumstances into account.

Several respondents suggested that penalties should be proportionate to the size, control, resources and conduct of the platform. Others said penalties should allow for the profile of the sellers, and whether they were occasional or high volume sellers. One respondent suggested that penalties should take into account the proportion of missing or inaccurate records and value of those records.

Some respondents also considered that platforms should not be penalised if they made reasonable efforts to comply, as it may not be possible to ensure that all information is accurate in practice without thorough but expensive and burdensome detailed due diligence checks. Others thought that there should be an allowance for unintended errors or acting in good faith. They said guidance on the application of mitigating factors and examples of what would be considered to be a reasonable excuse would be helpful.

Several respondents also suggested that a ‘light touch’ approach should be adopted for smaller platforms, or platforms which are making a genuine effort to comply, or in early years when platforms are adapting to the change.

A few respondents recommended that the penalty design should incorporate situations where sellers are unresponsive and don’t provide the required information. They also welcomed the proposal that platforms should not be compelled to withhold payment or remove sellers who have not provided the required information. However, they pointed out that if platforms were liable for a penalty then they might have no choice other than to suspend sellers or take other action against non-compliant sellers.

A few respondents wondered how HMRC would enforce penalties on overseas platforms that provided incorrect or incomplete data, or have any control over penalties enforced by other tax authorities.

One respondent suggested that the record keeping requirement should be extended to 6 years to align with other requirements for businesses to keep records. Another thought that penalties for failing to keep records was unnecessarily burdensome and complex.

Government response

The government considers that penalties should be reasonable and proportionate, but also high enough to act as a deterrent to be effective. The government has considered the comments made by respondents and thought about how the penalty regime would apply in more detail. It wants penalties to be proportionate to the degree of non-compliance. HMRC also believes that penalties should be broadly aligned with those charged by other countries for failing to comply with reporting obligations. Penalties should also be reduced for a number of mitigating factors as set out in the consultation, and should not be charged if a platform has a reasonable excuse for failing to comply. HMRC will set out details of the proposed penalties and penalty process in draft regulations, but the general approach is outlined below.

Platform operators will be liable to a maximum penalty of up to £100 for each inaccurate or incomplete record for a reportable seller that they submit. This penalty will also apply to any seller record where the platform operator has not carried out the required due diligence checks, or failed to keep a record of the steps undertaken for due diligence purposes. This would mean that small platforms with fewer sellers would potentially face lower penalties than bigger platforms with large numbers of sellers, making the penalty proportionate to the size of the platform and the non-compliance.

Platform operators will also be liable to an initial penalty of up to £5,000 and continuing daily penalties of up to £600 per day for failing to report by the 31 January deadline. These penalties are the same as those for failing to report arrangements under the International Tax Enforcement (Disclosable Arrangements) Regulations 2020.

The maximum penalties will be reduced for a number of mitigating factors. These could include, for example, the conduct of the platform, the effort made to comply with the rules, the size and scale of the failure or consequences of the error, the degree of co-operation and disclosure, and any remedial action taken by the platform. This means that the actual penalties charged will be lower in practice, especially in the initial years when platforms are getting used to the new obligations.

A penalty will not be charged if a platform had a reasonable excuse for failing to comply with the requirements or for making an error or omission. A platform will also be able to appeal against a penalty to the independent tax tribunal.

Further details of the mitigation factors and how they would be applied, the circumstances where a reasonable excuse might arise, the penalty assessment and appeal processes will be given in guidance.

Platforms should consider what action they could take to ensure seller compliance. This could include withholding payment, increasing fees, issuing reminders and making appropriate contractual arrangements with sellers to ensure that they provide the required information and update it when necessary. Although platforms will be liable to a penalty if sellers do not provide the required information, it is up to platforms whether or not they remove sellers.

Assessment of impacts

Question 15 – What additional one-off or regular costs do you expect to incur to comply with the requirements of the model rules?  Please provide any information, such as costs, staff time or number of sellers/platforms affected which would help HMRC to quantify the impacts of this measure more precisely.

There were 10 responses to this question.

Several respondents said they expected the cost of complying with rules to be significant or extensive, although only a couple estimated the cost or time involved. The said costs are likely to be incurred on:

• additional staff to implement and monitor the changes
• training staff, management and specialist advice
• analysis of existing seller data to determine additional data requirements
• contacting existing sellers to gather the required information and store it
• updating contractual arrangements and existing policies or processes
• changes to onboarding processes, websites and databases
• developing or buying software and other technical solutions to gather, validate and report the data
• verifying the collected data
• expertise to produce reports in an XML format
• additional guidance and support for sellers

Some respondents pointed out that costs and impacts would depend on the design and detailed requirements, such as what verification and due diligence is required. They also said costs would also increase if platforms had to contact sellers multiple times to obtain data.

A few respondents commented that sellers will also incur costs if they engage an accountant or tax advisor to check their tax position. They also suggested HMRC should also use the reported data carefully and intelligently to avoid unnecessary enquiries and the associated costs of those for taxpayers.

Government response

The government is conscious of the additional costs that platforms and sellers will incur to comply with the new rules. The additional impacts identified in the consultation responses will be reflected in a revised Summary of impacts.

Wherever possible the government will align closely with the model rules to ensure consistency of reporting requirements across jurisdictions and to minimise burdens.

Next steps

The government will be publishing the draft regulations implementing the new reporting rules following the publication of this summary of responses for an 8 week ‘technical’ consultation. The government welcomes comments on the draft regulations to ensure that they work as intended. The draft regulations are expected to be finalised later this year and to be laid at the end of this year or early next year.

HMRC will continue to work with platforms, advisers and representative bodies, including many of the respondents, to understand the issues raised by the consultation and responses more fully. This insight will feed into the development of the IT systems and HMRC processes so that as many views and concerns of stakeholders as possible are taken into account in the design of the reporting service and associated processes.

HMRC will also continue to engage with stakeholders to discuss their queries about some of the details of the new reporting rules. This will help HMRC to draft the detailed guidance for platforms and their advisors to provide greater clarity on the practical implementation details and on the interpretation of the legislation. Final guidance is expected to be published in the International Exchange of Information Manual, available on gov.uk, before the regulations come into force.

HMRC will also work closely with platforms, advisers and representative bodies to understand what information sellers might need and to discuss how HMRC guidance on GOV.UK might be improved for sellers.

Annex A: List of stakeholders consulted

abrdn plc

Airbnb

A Place for Rover, Inc. (known as Rover)

Association of Accounting Technician’s

British Vehicle Rental & Leasing Association

Chartered Institute of Taxation

Efficient Frontiers International

Etsy

Deliveroo

Deloitte LLP

Forum of Private Business

Getaround

Institute of Chartered Accountants in England and Wales

Institute of Chartered Accountants of Scotland

Just Eat UK

Low Incomes Tax Reform Group

Pearl Lily & Co Accountants

PricewaterhouseCoopers LLP

Quintain Limited

Tax Director Network (TDN)

The Investing and Saving Alliance

Travelport Group

Uber

UK Short Term Accommodation Association

Untied

Upwork Global Inc

2 individuals

*[CRN}: company registration number *[UTR]: unique taxpayer reference *[NINO]: National Insurance number *[VRN]: VAT registration number *[VRNs]: VAT registration numbers *[TIN]: tax identification number