Online marketplaces could take on more of an employer-style role in making sure people using these websites to sell goods and services pay the right amount of tax, the Government has suggested.
In a consultation document, the Government said it is keen to explore “what role platforms could play in tax administration, in the way other intermediaries, such as employers, have done in the past and continue to do”.
With activities ranging from offering parking on a driveway or renting rooms on a short-term basis to selling goods, website users may struggle to find advice that fits their situation, the Government said.
It wants to understand more about the role that websites could play as middlemen between their users and the taxman.
A Treasury spokesman said: “More and more we see people operating from home, selling stuff online or operating through the shared economy.”
The spokesman added: “There are particular rules, we are not changing those rules, but sometimes those rules might not be being met.”
Online platforms give people a range of opportunities to make money.
The consultation focuses on websites that support the sharing economy such as allowing people to earn money from spare rooms; websites that facilitate the gig economy such as by allowing people to use their time and resources to generate income; and websites that connect buyers with people or businesses offering services or goods for sale.
The growth of these websites makes it significantly easier for people to earn secondary sources of income – giving the dishonest minority a potential opportunity to seek to evade paying tax – and Government is looking at how it can work with websites to limit dishonest behaviour.
Other website users may genuinely not understand that money earned this way can attract a tax liability. Research from HMRC found over half (54%) of people saw their sharing economy activity as just a way of making some extra money rather than employment or self-employment, suggesting many may not recognise this as a potentially taxable activity, the consultation document said.
Not all website users will have an immediate tax liability – particularly given two £1,000 sharing economy allowances introduced in April 2017.
Some activities may not attract any tax liability – for example simply selling some unwanted possessions.
But some people could move into activities that would fall within the legal definition of trading without understanding that what they are doing has become taxable, the consultation document said.
Under the trading and property income allowances, as of April 2017, people can get up to £1,000 a year in tax-free allowances for property or trading income. If they have both types of income, they can get a £1,000 allowance for each.
The consultation closes on June 8. The Government wants to hear from websites and people and businesses using them, tax bodies and others.