HMRC Reporting Obligations for Websites or Apps that act as marketplaces for Goods and Services
22 November 2023
Who will the new reporting obligations apply to?
Digital Platforms are within scope of these new reporting obligations and these are expected to include software (including websites or apps) that (i) facilitate transactions between providers of goods and services and their customers or (ii) purchase services or goods from sellers and offer them in their own name. Software that merely advertises services, or processes payments or redirects users to another platform will not be subject to the rules.
To come into scope, sellers will have to provide goods or relevant services (immoveable property, personal services (such as transport and food delivery) and transport rental).
When will the obligations start to apply?
HMRC will apply the rules from 1 January 2024 with the first reports due by 31 January 2025.
How do the reporting obligations work?
Information Collection
Digital Platforms captured by the reporting obligations are required to collect information about the identity and location of in scope sellers, and the amount earned by in scope sellers from the platform during each quarter. For sellers providing property listing services, collection of additional information about the properties listed is also required.
Information Verification
The reporting obligations provide that the requisite information must be collected by applying the due diligence procedures contained in the OECD's Model Rules for Reporting by Platform Operators. Broadly, these procedures require a Digital Platform to determine whether the information collected is reliable with reference to all records available to it as well as publicly available information.
A record of all steps taken to comply with the information collection obligations, and information obtained in applying the due diligence procedures, must be kept for five years from the end of the calendar year for which the Digital Platform was in scope of the reporting obligations, referred to as a "reportable period".
Reporting Requirements
Following the end of a reportable period, a Digital Platform must report to HMRC the information it has collected on or before 31 January following the end of that reportable period. A Digital Platform is also required to share with in scope sellers the information it has collected about them by the same date. The draft regulations envisage reports being made via an electronic reporting system.
However, where a Digital Platform believes another Digital Platform will make a report to HMRC containing the information it would otherwise be required to provide, it will not be required to submit reports to HMRC.
Penalties for Non Compliance
In the absence of a reasonable excuse for non-compliance, failure to comply with any aspect of the reporting obligations carries the risks of a fine. In some cases, continuous non-compliance following a notice of assessment issued by HMRC will increase the fine day-on-day.
Which Digital Platforms are excluded from the reporting obligations?
A digital platform is excluded if its business model is such that:
(a) a seller cannot derive a profit from the compensation it receives (an example is a platform which facilitates cost-sharing services where the individual sellers of those services charge fees to recover part/all of their costs but do not generate a profit); or
(b) it has no "Reportable Sellers". The definition of "Reportable Sellers" in the OECD Model Rules covers most individuals and unlisted companies. If relying on this exclusion, specific advice should be obtained to confirm that none of the sellers on the Digital Platform satisfy the definition of "Reportable Seller".
How can Ashurst assist you with these new reporting obligations?
Ashurst can assist with all aspects of the project whether you would like us to give advice on specific issues or parts of the reporting process or to help you implement or test your reporting solution consistent with the rules.
Our legal team can advise on the scope of the new rules and the legal requirements that must be satisfied, the data protection issues associated with collecting and verifying the information required to be reported.
Our risk advisory team can assist platforms with all aspects of the implementation of the reporting requirements including collection and verification of information and data processing and reporting. They can also advise on audit processes to ensure that the processes adopted by a digital platform comply with these reporting requirements.
There are similar rules applicable in the EU and other jurisdictions and our global team can assist with the implementation and audit of these reporting obligations in other jurisdictions.
