IEIM901700 - Consideration
The payments made to Sellers for their goods or services, or “Consideration”, are defined in the Model Rules as “compensation in any form paid or credited to a Seller in connection with Relevant Activities, the amount of which is known, or reasonably knowable, by the Platform Operator”.
Consideration includes the payment made to a Seller for goods and/or services as well as other payments associated with those activities such as tips, gratuities and incentives paid or credited to the Seller.
The reported Consideration will be used by HMRC to check if the Seller has included the income on their tax return, or if the income is taxable. The Consideration should therefore be in the nature of income so that the appropriate comparison can be made.
Occasionally, Sellers may receive capital payments, for example, compensation for the loss of an asset used in connection with Relevant Activities. The nature of a payment in the hands of the recipient may not always be obvious to the Platform Operator (PO). Therefore, whilst it could be argued that such payments are not strictly Consideration, HMRC accepts that POs may not always be able to separate out payments of this nature. For this reason, POs may report all Consideration received.
If a transaction does not fall within the scope of the rules, such as the sale of a business’s own goods because it is not a Relevant Activity or the entity facilitating that transaction is not a Platform then it follows that any payment in respect of that transaction would not be Consideration.