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Model Reporting Rules for Digital Platforms

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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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Former tennis pro faces IR35 bill after adviser misses appeal deadline

Service fault by representative sees Sky Sports pundit’s IR35 appeal turned down

Barry Cowan, a former tennis player turned Sky Sports pundit, has lost his chance to appeal an IR35 case after an advisory blunder.

The appeal would have contested the finding of an IR35 investigation, which HMRC delivered its decision on in 2021. During the investigation, HMRC set out its view that Cowan should have been treated as an employee for tax purposes (inside IR35) when working on contracts held with Sky Sports between 2014 and 2019.

Cowan and his representatives were informed of this decision via a ‘view of the matter’ letter issued by HMRC. Crucially, the letter also clearly set out that they had 30 days to request an appeal or accept the tax office’s offer of an internal review.

Whether Cowan would have been found inside or outside of IR35 at appeal is irrelevant – as his advisers failed to request an appeal in time. Instead, they argued with HMRC via email, demanding responses to a number of points raised in dispute with HMRC’s position, missing the deadline. 

Under these circumstances, the right to appeal can only be granted at tribunal; Cowan’s request was heard at a first-tier tax tribunal on the 21st March 2023.

However, tribunal judge Amanda Brown KC was “not persuaded to grant permission” to appeal. This was because – in the correspondence between HMRC and Cowan’s representative – “it was clear that HMRC considered the time limit to have expired”, according to the case notes.

“Rather than seek to remediate the position as soon as possible the representative continued to lock horns with what he considered to be the outrageous conduct of HMRC,” Brown said. 

The judge also said that “the Applicant’s representative simply expressed increased frustration and indignation at HMRC’s conduct without considering what course of conduct would represent his client’s best interests.”


HMRC continues to target presenters, pundits and commentators

Cowan is one of a number of high profile pundits and commentators who have held contracts with Sky and also been subject to an IR35 investigation in recent years. 

Alan Parry and Stuart Barnes also both endured protracted IR35 investigations. Parry lost his case in July 2022, leaving him with a tax bill of over £350,000. However, Barnes was successful in his IR35 appeal in January of this year, overturning a tax bill worth almost £700,000.

Over the years, HMRC has also targeted several other presenters, including Lorraine Kelly, Gary Lineker and Adrian Chiles; who all successfully contested their cases. Others, such as Eamonn Holmes, have failed in their appeals – and been hit with large tax bills as a result.

Michael Lynagh, another Sky Sports commentator, also lost his case in similar circumstances to Cowan, with his advisers also failing to lodge the appeal within the deadline specified by HMRC. 

Speaking to Business Matters, Qdos CEO Seb Maley said Cowan’s case highlights the need for “support you can count on”, as “IR35 cases can carry millions in tax liability and HMRC is noticeably ramping up its compliance activity”.

What does this case mean for contractors?

This case was opened prior to the introduction of the off-payroll working rules, however it’s worth noting that contractors can still be subject to IR35 investigations – whether for engagements completed before the rule changes or when a contractor is engaged by a small business.  

Additionally – and given that the Cowan case is the second time that a contractor’s advisers have missed important deadlines – it’s important that you have expert support in the event of an IR35 investigation. 

Finally, holding a comprehensive IR35 insurance policy will protect you in the event of a tax investigation, giving you the support of an expert when you need it most. 

By:Benedict Smith


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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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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