Policy paper

Reporting rules for digital platforms

Updated 20 July 2023

Who is likely to be affected

This measure will affect digital platforms in the UK that facilitate the provision of services or the sale of goods by UK or other taxpayers.

The measure will also affect UK taxpayers, including individuals and companies, who provide services or sell goods on digital platforms.

Digital platforms include apps and websites which facilitate the provision of goods and services such as the provision of taxi and private hire services, food delivery services, freelance work and the letting of short-term accommodation.

General description of the measure

The power to enable these regulations to be made was introduced under section 349 of the Finance (No.2) Act 2023.

This measure introduces regulations which will require certain UK digital platforms to report information to HMRC about the income of sellers of goods and services on their platform. HMRC will then exchange the information with the other participating tax authorities for the jurisdictions where the sellers are tax resident.

Under the Organisation for Economic Co-operation and Development (OECD) rules, digital platforms in participating jurisdictions will be required to provide a copy of the information to the taxpayer to help them comply with their tax obligations.

Policy objective

The regulations will support the government’s work to help taxpayers get their tax right first time, and to bear down on tax evasion.

While HMRC already has the power to access information from UK-based platforms on the income of sellers on the platform, implementing the OECD rules will enable HMRC to exchange information with other tax authorities to access data from platforms based outside the UK quickly and efficiently.

This will improve international cooperation and mean that tax authorities have similar visibility of income for sellers on digital platforms as they would have with traditional businesses. A consistent, standardised international approach to provision of information will also be better for platforms as it is designed to prevent a patchwork of domestic reporting requirements.

The rules will also make it easier for sellers on these platforms to comply and will help HMRC to detect and tackle tax evasion when they do not.

Background to the measure

In July 2020, the OECD published the “Model Rules for Reporting by Platform Operators with respect to Sellers in the Sharing and Gig Economy (MRDP)”. The UK was involved in the discussions and agreement of these model rules at the OECD. The OECD subsequently extended the scope of the rules to include the sale of goods.

The power in section 349 of Finance (No.2) Act 2023 was introduced so that the UK could implement the model rules via secondary legislation, following consultation.

At the Spring Budget in 2021, the government announced that the UK would implement the MRDP. In summer 2021, the UK consulted on the implementation of MRDP.

Draft regulations were published on 18 October 2022 to seek technical feedback to ensure they operated as the government intended and to identify any areas which needed further clarification in more detailed guidance.

Detailed proposal

Operative date

The regulations will apply from 1 January 2024, with reporting due from January 2025.

Current law

This is a new measure and does not amend any current law.

Proposed revisions

This measure implements the OECD “Model Rules for Reporting by Platform Operators with respect to Sellers in the Sharing and Gig Economy” (as later extended) in the UK by introducing regulations which incorporate the OECD rules and provide for enforcement and penalties.

Summary of impacts

Exchequer impact (£m)

2023 to 2024	2024 to 2025	2025 to 2026	2026 to 2027	2027 to 2028	2028 to 2029
Empty	Empty	Empty	Empty	Empty	Empty

The final costing will be subject to scrutiny by the Office for Budget Responsibility and will be set out at a future fiscal event.

Economic impact

This measure is not expected to have any significant macroeconomic impacts.

Impact on individuals, households and families

The measure is not expected to have an impact on individuals who use digital platforms to buy goods or services.

This measure is not expected to have an impact on family formation, stability or breakdown.

Equalities impacts

It is not anticipated that there will be impacts for groups sharing protected characteristics.

Impact on business including civil society organisations

This measure is likely to increase customer costs for some of the businesses affected. HMRC is working to understand these costs and the scope of any impacts better and will update at a future fiscal event.

Digital Platforms

This measure is expected to have a significant impact on UK digital platform operators who will have to collect specific pieces of information about sellers, which some platforms will not already collect. UK platforms will have to verify that information, collate and report it to enable the seller to be identified and matched with data HMRC holds, identify the residency of the seller and the jurisdiction in which a property is located.

There will be one-off costs which will include familiarisation with the change and could also include updating their website or software to collect more information, updating their IT and training staff to provide information to tax authorities in XML schema format, training staff to implement the new information collection and verification processes, and communicating the changes to sellers using the platform.

Continuing costs could include digital platforms collecting more information than they currently do now from sellers on their platforms and sending that information to HMRC annually.

Customer experience for some digital platforms should improve as the rules simplify the reporting for platforms, under a global system, which may reduce administrative burdens for them.

Customer experience for digital platforms could be negatively affected as this change is complex and may require them to perform tasks they do not currently perform. Digital platforms were consulted in the OECD drafting process, HMRC has consulted on the new regulations in the UK and will, in due course, issue clear guidance on how to comply with the new rules.

The government will look to minimise burdens for platforms where possible, while also ensuring that the information reported is accurate and useful. The rules include a phasing in period for some of the obligations to help spread out the initial impact.

Businesses including individuals who sell services or rent out property through Digital Platforms

This measure is expected to have a significant combined impact on an estimated 2-5 million businesses who provide their services via digital platforms though the impact for each seller is expected to be small.

Data, including bank account information if the platform holds that information, will be collected and provided to HMRC, and exchanged with other tax authorities when appropriate. This information will be used to identify and risk assess the individual or company.

One-off costs will include familiarisation with the change and could include providing specific information and documents to digital platforms either when registering or as part of a verification process. This includes name, address, and tax identification number.

There are not expected to be any continuing costs.

Customer experience for these sellers is expected to improve as they will receive a copy of the information that has been submitted to a tax authority. This should help them to declare the right income and may make complying with their tax obligations easier.

There is expected to be no impact on civil society organisations.

Operational impact (£m) (HMRC or other)

There is an estimated cost to HMRC of £36.69m including 24 Full Time Equivalent (FTE) required. However, the costs to HMRC are currently being developed further.

Other impacts

A Data Protection Impact Assessment is being undertaken alongside the regulations.

Other impacts have been considered and none have been identified.

Monitoring and evaluation

This measure will be kept under review and monitored by evaluating information collected from digital platforms.

Further advice

If you have any questions about this change, please contact the Exchange of Information policy team by email: eoi.policy@hmrc.gov.uk.

Declaration

Victoria Atkins MP, the Financial Secretary to the Treasury has read this tax information and impact note and is satisfied that, given the available evidence, it represents a reasonable view of the likely costs, benefits and impacts of the measure.