New Reporting Rules for Digital Platforms effective 1 January 2024

A reminder that organisations that are defined as a Platform Operator (PO) under this legislation will face additional reporting requirements for information relating to sellers using its platform for their supplies to third parties. The regulations came into force from the 1^st January 2024 but the first reporting period is the year to 31 December 2024 with the obligation to submit the required reports to HMRC by the 31st January 2025.

The aim is to improve tax compliance from those sellers using such platforms as a means to access their markets, whether they are selling goods or certain “relevant” services. Those services will cover:

a)    the rental of immoveable property (residential/commercial inc parking spaces);

b)    a Personal Service; or

c)    the rental of a means of transport.

Examples given in the HMRC guidance of what constitutes a personal service include:

• transport services (such as taxi and private vehicle hire with a driver)
• delivery of goods or services (for example, food delivery)
• online services (such as IT services, data entry/manipulation, copywriting)
• freelance and professional work (for example, accountancy, tutoring, legal advice)
• provision of labour (such as cleaning, gardening, renovation)
• seasonal and temporary work (for example, event management, catering)

but in general covers “time or task based” work undertaken for a customer.

The obligation to report the information to HMRC by the PO is accompanied by the risk of penalties for failing to do so and to apply the appropriate level of due diligence checks outlined in the regulations – which you can find here

These reporting requirements are not directly VAT related but demonstrate the direction of travel not just in the UK but globally, as they link back to the Organisation for Economic Cooperation and Development (OECD) paper published in July 2020 titled the “Model Reporting Rules for Digital Platforms (MRDP) – details of which can be accessed through this link . This is not just a European initiative or institution, as there are 38 members of the OECD across the globe.

Indirect Taxes, such as VAT, will clearly be in the spotlight of this project and it is likely that smaller businesses or individuals, operating through such platforms, will be the sector to see the impact first as PO’s start to submit the data they have collected on activity by such sellers through their platforms. The impact for the PO’s themselves will be in the accurate collection, storage and submission of the required data to HMRC.

An issue for any business adviser or auditor to reflect on across a broad range of clients therefore.

This article is provided for information only – should advice and support on the VAT impact of these regulations be required then do get in touch at IndirectTax@Xeinadin.com