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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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Calling for an end to double taxation

HMRC faces pressure to address issue of double taxation by introducing offset mechanism to off-payroll rules

Leading trade body, ASPCo, have recently made their stance clear on the issue of double taxation, highlighting that a change to the Off Payroll rules is necessary to ensure the fair treatment of the recruitment industry.

As things stand, if a contractor’s engagement is found to be caught by the Off Payroll rules, the fee-payer (often a recruitment agency) will be liable for the full amount of tax and national insurance which would have been payable had the contractor been an employee. This liability will be based on the gross fees paid to the contractor, despite the fact that the contractor would have paid Corporation Tax, PAYE and dividend tax on their income.

The pre-reform version of IR35 (chapter 8) allowed a direct offset of these taxes, meaning the gross liability would have been reduced significantly based on tax already paid. The reformed rules in chapter 10, however, do not contain any such mechanism.

The issue of double taxation doesn’t impact recruitment businesses alone, whether worker or engager, both parties could be paying more than they owe. Let’s take a look at the current situation before receiving some insights from Qdos Head of Tax, and former HMRC Tax Inspector, Nigel Nordone.


An industry calling for change

We’ve been seeing calls for HMRC to address double taxation since IR35 reform in the public sector was first introduced on 6 April 2017. Now, it appears that there is a renewed push for change with APSCo and other industry specialists taking the lead.

Tania Bowers, a Global Public Policy Director at APSCo, and a member of the HMRC Intermediaries and Employment Forum, has made a statement regarding double taxation.

In that statement she highlights that changes are required to ensure Off Payroll “doesn’t unfairly penalise both recruitment firms and highly skilled contractors” and reinforces that APSCo “continue to work closely with HMRC on changes to the rules including potential solutions to the double taxation that is inherent in the current rules”.

It was the hope of many that the situation would receive attention during the Spring Budget, but the problem remained unaddressed.


Qdos Head of Tax, Nigel Nordone, unpacks relevant case law

The issue of double taxation is not new, and was subject of a tax case in 2005, Demibourne Ltd v HMRC (2005).

This case concerned an employer who was engaging a worker (Mr Bone) on a self-employed basis, and who, following a HMRC investigation was deemed to be an employee of the employer. As a consequence of this incorrect employment status classification, the employer had failed to deduct PAYE on the employee’s income.

The case established the principle that where an employment relationship exists, the employer is responsible for deducting tax from payments made in accordance with the PAYE regulations. If the employer has failed to deduct PAYE from the employee’s salary, then HMRC can recover any unpaid PAYE from the employer, even if the employee had paid tax via self-assessment on the same income.

As part of the Demibourne case, the employer argued that any tax and NIC paid by the employee via his self-assessment should be offset against the PAYE liability that had arisen from his reclassification as an employee.

Following the employer’s arguments regarding double taxation, the presiding judge in the case stated: “The parties [Demibourne and HMRC] are encouraged to arrive at a negotiated settlement to take account of the tax that Mr Bone has already paid.”

HMRC published guidance on the consequences of this case on 16 September 2008 and a link to the regulations pertaining to setoffs can be found here - Regulation 72F ITEPA 2008  


Our stance on the matter of double taxation

Nigel Nordone offers his insight:

“Whilst the issue of double taxation has been around for a long time, it is one that HMRC urgently needs to address, as it is clearly unfair on all parties both under the off-payroll rules Chapter 10, part 2 ITEPA 2003 and IR35 Chapter 8, part 2 ITEPA 2003.

HMRC have just announced the beginning of a consultation to address the issue of double taxation. The consultation, running from 27th April to 22nd June 2023, aims to evaluate views on potential options and find a solution to the ongoing problem faced by the industry.

The main takeaway here is that HMRC appears to be listening and we can only hope that they will continue to listen, and that positive change is on the way.

By:Alice Hickling


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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