Tax transparency for the gig economy

From 1 January 2024 onwards digital platforms are required to share information on their users with HMRC. This is the latest step in a global move towards cross-border data sharing and transparency, to help tax authorities ensure that all individuals and businesses income is correctly declared and taxed.

Digital platform transparency

The rules require digital platforms to collect information on the income realised by those selling goods or offering accommodation, transport and personal services through their platforms and to report that information to local tax authorities. This is based on a standardised data exchange schema that was published by the OECD.

Digital platforms are now expected to be familiar with the new rules, penalties for non-compliance and begin to collect information from 1 January 2024. The first reports will need to be submitted to HMRC by 31 January 2025.

After January 2025, HMRC will be able to share data on non-UK users with other tax authorities who also adopted the OECD’s rules. The OECD has announced that as well as the UK, the following countries have signed up to exchange information from digital platforms: Argentina, Belgium, Bulgaria, Canada, Colombia, Costa Rica, Cyprus, Estonia, Finland, Iceland, Ireland, Latvia, Luxembourg, Malta, the Netherlands, New Zealand, Norway, Poland, Portugal, the Slovak Republic, Slovenia, Spain and Sweden.

Impact on taxpayers who have a side hustle

The rules are designed to help individuals and businesses in preparing their tax returns by providing them with a statement of the amount earned through the platforms, as well as any fees, commissions and taxes paid or withheld by platform operators. The users will, therefore, know what data the platform is sharing (i.e. the data that HMRC will see) albeit on a calendar year basis.

Those selling goods and providing services through digital platforms therefore have some time now to check whether they understand what income/gains they need to declare and what UK tax they need to pay.

The digital platforms do not need to share the information with HMRC where per year a user makes fewer than 30 sales through the platform and receives less than £1,700. However, where the activity amounts to a trade, there is a need to report details to HMRC if the income is over £1,000 for a tax year.

Getting your taxes up to date