The Revenue has chosen the week commencing 16 January to start hassling online sellers, gig economy workers and influencers for tax they may owe on undeclared sales.
HMRC’s new one-to-many letter campaign was launched in mid-January. HMRC expect to send thousands of nudge letters to individuals who earn significant amounts from selling goods or services online, or who receive value for creating online content.
Nudge nudge
There are two forms of nudge letter going out to two specific categories of taxpayer.
Letter 1 is directed at those who sell goods or their own services through online marketplaces. This includes people who sell items on eBay or Etsy, taxi drivers who find their rides through platforms such as Uber or Lyft, and self-employed delivery drivers.
Letter 2 is addressed to people who have created online content and who generate money from that work; authors and influencers may fall into this category.
“With so much of the UK economy going online since the pandemic, it is surprising that HMRC has not focused fully on this area before,” commented Dawn Register, Tax Dispute Resolution partner at BDO commented.
“HMRC has information from online marketplaces already. Online content creators are a specific target so online ‘influencers’ as well as more traditional sellers and casual workers bidding for work online can expect to be contacted.”
What is significant?
The nudge letters say HMRC has information that the individual has not declared all or some of the income from online sales or from creating content on digital platforms.
However, HMRC told the CIOT that the letters are only being sent where it has information that the recipient has traded and has earned more than £12,570 from their online sales.
It isn’t clear what periods the income is supposed to have arisen from, as HMRC makes no mention of dates in the nudge letters. But the periods covered are likely to be prior to 2020/21.
Dirty data
For the tax authority to assert that a taxpayer has not declared taxable income, it must be fairly confident it has correctly identified the right individual as a recipient of this campaign.
Online influencers do not always operate under their full given name, so the HMRC Connect database may need additional data points in order to match a famous face to a national insurance number or UTR number.