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Model Reporting Rules for Digital Platforms

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A BASIC GUIDE FOR FREELANCERS AND PLATFORM OPERATORS

 

OECD Model Reporting Rules

From January 2023, digital platforms that enable individuals to earn money by selling services through them will become responsible for reporting sellers’ income to HMRC. This is in addition to the self-employed individuals themselves continuing to submit this information to the tax office on their self-assessment tax return.

If there are any discrepancies between information provided by a digital platform and the individual, HMRC could have grounds to launch a tax enquiry. 

The government will introduce these changes in a move to ensure gig economy workers are paying the correct amount of tax. As a result, and because HMRC will soon have a record of a freelancer’s or gig economy worker’s earnings, those working through digital platforms must make sure they report the correct income via their personal tax return annually and maintain an appropriate record of expenses.

The implementation of the rules is currently under consultation until 22nd October 2021, with the government considering whether to include the sale of goods within the scope of these changes.

 

What are the Model Reporting Rules for Digital Platforms?

 

The Model Reporting Rules for Digital Platforms is an international framework introduced by the OECD for reporting on individuals selling their services via digital marketplace platforms and sharing such information with the relevant tax authority, in order to ensure the tax compliance of freelancers and gig economy workers.

Under these rules, by January 2023 online businesses that facilitate the selling of rental property and/or personal services (with a possible extension to the sale of goods) must:

  • Collect details about individuals earning over €2,000 per year (or those who have made 30+ transactions) from the platform and verify the seller’s information

  • Report the seller’s earnings to HMRC annually by 31st January

  • Share this information with the ‘seller’ (the worker)


The information will be used by HMRC to:

  • Obtain income information from overseas platforms for UK-resident sellers

  • To detect and tackle tax non-compliance of gig economy and freelance workers

  • Share income information with the appropriate international tax authority where the seller is a resident abroad

What is the OECD?

 

The Organisation for Economic Co-operation and Development (OECD) is an intergovernmental organisation which establishes international standards and information-sharing for its 38 member countries, including the UK, US, Australia, and much of Europe. It has a particular focus on economic policy and tax evasion.

 

Who do the reporting rules apply to?

 

If you are providing any of the following relevant services via a digital marketplace or online platform, software, or app, the reporting rules will apply and your income will be shared directly to HMRC (or relevant tax authority) by the platform under the new rules:

  • Rental of immovable property, such as holiday accommodation and parking spaces (excludes hotels).

  • Personal services, such as food delivery, private transport hire, freelance work such as bookkeeping and graphic design, offline services such as gardening, cleaning, dance instruction and seasonal work such as events or restaurant/bar work.

If you are a digital platform operator which connects sellers providing any of the above services to buyers, you may need to report to HMRC or the relevant tax authority information regarding these sellers. These incoming changes apply to a wide range of online businesses, softwares and apps, as the policy document outlines:

“A “Platform” means any software, including a website or a part thereof and applications, including mobile applications, accessible by users and allowing Sellers to be connected to other users for the provision of Relevant Services or the sale of Goods , directly or indirectly, to such users.”

This could therefore include the likes of Uber, Deliveroo, Airbnb, Upwork, Fiverr, Freelancer.com, TaskRabbit, Bark, and many more platforms on which individuals are able to earn a self-employed income, whether full or part-time.

The rules do not encompass businesses such as recruitment agencies, directories, payment services such as PayPal or hotel booking sites. Contractors engaged by these platforms to provide services for the platforms themselves will also not be included within these rules.

 

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Eight tips to help you complete your Self Assessment before 31st January

A count down of the top eight need to know tips to help you complete self assessment before the deadline

Article by GoSimpleTax

As 2022 begins with the online filing deadline of 31st January looming, completing your self assessment tax return in time for the deadline day may seem like an impossible task, especially if you are not receiving the support and guidance that you need.

Unfortunately, filing your Self Assessment tax return is unavoidable if you earn money that’s subject to Income Tax. So, here are ten top tips from our partners, GoSimpleTax, to make your Self Assessment tax returns much less taxing, so you can get back to doing what you do best.

 

1. Get to grips with Self Assessment

Do some online research and search for advice from reliable sources. You may be able to find ways to save time and make sure that your Self Assessment tax return is properly filled out. Take a look at the Essential Guide To Self Assessment or read HMRC’s guidance on Self Assessment tax returns. HMRC has published a comprehensive range of Self Assessment guidance, including concise YouTube Self Assessment videos and live and recorded webinars (registration required).

 

2. Use accounting and Self Assessment filing software

Using good accounting software to accurately and regularly record your income and expenses can make completing your Self Assessment tax return that much easier, as key numbers are automatically calculated for you. You can also use other third-party software that makes completing and filing your Self Assessment tax returns easier, as well as ensuring that your Self Assessment tax returns are error-free.

Don’t forget, with Qdos insurance you get 30% off GoSimpleTax SA103 services. Simply follow the links provided in your Qdos account to benefit.

 

3. Have all the necessary information to hand

Having to go and find information, from hard-copy invoices, bank statements and receipts, to records of earnings from other taxable sources (e.g. rental income and pensions), will mean that filling out your Self Assessment tax return takes a long time.

If you haven’t completed a Self Assessment tax return previously, you will also need your UTR (unique ten-digit reference number that enables HMRC to identify you), your National Insurance number, and P60 (if you’re also employed and paid via PAYE).

This is where a third-party system where you can log income and expenses on the go can help make filing your Self Assessment tax return a much easier and simpler process.

 

4. Claim your rightful tax allowances and reliefs

Self employed professionals can claim a variety of tax allowances (upon which no tax is payable) and reliefs (which lower your profit and resulting Income Tax liability). The Government website GOV.uk explains expenses you may be able to claim if you’re self-employed, as well as Income Tax reliefs and personal allowances. For further information specifically about expenses, you may wish to take a look at Qdos’ Basic Guide To Expenses For The Self Employed. Make sure that you’re claiming everything to which you’re entitled so you are not paying unnecessary taxes.

 

5. Consider simplified expenses where relevant

“Simplified expenses” are a way to claim business expenses using flat rates rather than working out actual costs, which can take much more time and effort.

This can be used for things like business mileage and the costs associated with operating your business from home.

While saving you time when filling out your Self Assessment tax return, you should be sure that claiming simplified expenses won’t leave you out of pocket. Gov.uk offers an online simplified expenses checker tool that enables you to find out.

 

6. Check your facts and figures

Once you’ve entered data into your Self Assessment tax return, double-check it all before submitting it to HMRC. Also take care when ticking boxes, as this is where mistakes often occur. More serious errors can lead to a penalty if HMRC believes they are the result of carelessness.

 

7. Don’t miss the deadline!

With so much to do at the start of a new year, it can be easy to miss the deadline. Set yourself some annual reminders, or better yet, complete your Self Assessment tax return well in advance.

In fact, you can complete and submit your Self Assessment tax return months prior to the deadline, when the new tax year begins on 6 April. If you can’t do it immediately, do it as soon as you can to save yourself problems later down the line.

You need to go through the Self Assessment tax return form thoroughly, paying due care and attention when entering data. The more you rush, the more likely you are to make mistakes that later need correcting.

The online filing deadline is midnight on 31st January, and missing it can result in a £100 late filing penalty.

For 2022 however (submissions of 2020-21 tax year) HMRC have waived this penalty as long as you submit before 28th February 2022. You will however be charged interest from 1st February and filing late could hinder any claims on your tax insurance policy for that tax year.

 

8. Reach out for Self Assessment support

In addition to HMRC’s online information resources, you can call their Self Assessment helpline (0300 200 3310 – Monday to Friday: 8am to 6pm). Make sure your personal details and address are up to date in your personal tax account, otherwise you could fail telephone security questions when asked. Also have your National Insurance number and Unique Taxpayer Reference (UTR) to hand when you call.

If the thought of completing and filing your first Self Assessment tax return or battling your way through another one is all too much, you could always get an experienced professional to do it for you or at very least, check over one you’ve filled out. It may even be cheaper than you think.

Unsure about where to start with tax returns? Click here to try out our free Self Assessment Tax Return Calculator.

 

About GoSimpleTax

Income, Expenses and tax submission all in one.

GoSimpleTax will provide you with tips that could save you money on allowances and expenses you might have missed.

The software submits directly to HMRC and is the solution for the self-employed, sole traders and anyone with income outside of PAYE to file their self-assessment giving hints and tips on savings along the way.

GoSimpleTax does all the calculations for you saving you money on accountancy fees. Available on desktop or mobile application.

Qdos have partnered with GoSimpleTax to provide you with free resources, as well as 30% off their Self Assessment submission services with your Qdos insurance, meaning you can submit direct to HMRC for only £34.30 instead of £49.

By:GoSimpleTax
 
 

 

What do the rules mean for freelancers and gig economy workers?

 

The government want to make sure that the rise in the digital economy does not result in a tax loss to the Treasury. It is clearly stated in the consultation that the information will be used “to ensure that sellers are complying with their tax obligations and to tackle non-compliance if they are not”.

This increases the risk of a tax enquiry for freelancers and gig economy workers, particularly if information provided by a digital platform differs from that submitted by the individual.

 

How can individuals manage these changes?

 

Because digital platforms will begin sharing the income of ‘sellers’ to HMRC, it’s crucial that the individual also ensures the correct amount is reported via their self-assessment tax return.

It is important to note that the platform is required to provide you with the same information that will be reported to the tax office.

Additionally, given the risk of a tax enquiry is increased, freelancers and gig economy workers are encouraged to protect themselves with Tax Enquiry Insurance to mitigate these risks.

Freelancers and gig economy workers using digital platforms should:

  1. Maintain adequate records of earnings and expenses
  2. Distinguish between earnings obtained through digital platforms and via other means

  3. Protect against a HMRC enquiry with Tax Enquiry Insurance

  4. Ensure the correct tax is paid on time to HMRC via self-assessment

 

What is Tax Enquiry Insurance?

Tax Enquiry Insurance provides individuals with expert defence should HMRC launch any range of enquiries. With this policy, an experienced Qdos tax consultant will handle all correspondence from HMRC throughout the duration of the enquiry. This offers policyholders reassurance that a trusted specialist with a proven track record is representing them. 

Irrespective of whether a person is operating with tax compliance, HMRC can open a tax enquiry at any given time, which can be time-consuming, stressful and potentially very costly if  not handled correctly. Qdos’ Tax Enquiry Insurance protection covers the cost of defence and support needed to manage the enquiry appropriately.

 

 

What do the rules mean for digital platforms?

 

Digital platform operators may face penalties for not complying with the reporting rules as required. This penalty regime is yet to be defined, however, will likely be based upon the due diligence taken to comply with the rules, and the timeliness and accuracy of reporting.

 

What do you need to do as a digital platform operator?

 

By January 2023, digital platform operators which connect sellers of relevant services to users, should:

  1. Identify all relevant and excluded sellers, ensuring a mechanism for ongoing checks for new sellers using the platform.
  2. Collect and verify information from relevant sellers including:
    1. Name
    2. Address
    3. Unique Taxpayer Reference (UTR) or National Insurance number*
    4. Date of birth or company registration number if applicable
  3. Determine the jurisdiction of residence for each relevant seller (based on the home or registered office address provided).
  4. Maintain adequate records of above information and checks made.

From January 2023, operators will need to:

  1. Complete the above for any new relevant sellers and maintain a record of changes (e.g. change of address/jurisdiction).
  2. Report relevant sellers’ information including earnings, payment account information, any deducted charges/fees, and further information if the service is for the rental of properties to HMRC by 31st January each year. HMRC will likely provide an online service for submitting this information.

*HMRC are consulting on the most relevant taxpayer identification number (TIN) to use for the reporting rules and so is subject to change.

 
 

 

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About Us

Why Qdos?

 

Qdos Contractor are one of the leading providers of specialist contractor insurance services in the UK. Our online application process takes only a matter of minutes with all documentation issued instantly. Unlike many other brokers, we don’t hide our premiums until you've provided your details, as we are confident that our premiums, service and product are the best in the market. In addition, Qdos Contractor is one of the leading authorities on the IR35 legislation and have handled well over 1,500 IR35 enquiries on behalf of UK contractors.

 

Our History

 

Qdos began in 1988 as a tax consultancy business and has grown significantly over the past two decades, providing expert business services, products and advice. Over the years, Qdos has grown in both size and reputation as a trusted contractor insurance broker as well as an expert tax advisor. Our aim is to provide UK contractors with the assistance and service with IR35 issues they need as well as sustaining excellent quality and competitive premiums in the contractor insurance market.

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