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July 31, 2015

The British tax authorities have plans to launch one of the “biggest tax crackdowns in history, ” targeting income made by sellers on internet based companies including Ebay, Gumtree and AirBnB among others. According to local reports, the government would collect “bulk” information from internet companies to target thousands of people who fail to declare income they make online. It is estimated that the online transactions could equal GBP 5.9 billion (USD 9.20 billion) a year in tax revenue. Under the new authority, HM Revenue and Customs (HMRC) could target information from Paypal, the online payment company owned by Ebay, smartphone application stores run by Apple and Google, holiday comparison websites and a host of other online retailers. The government has clarified it is not targeting individuals selling personal possessions, but intends to go after companies and individuals making a business of online transactions. 

Analyst Comment: In addition to the increased privacy risks entailed with the government’s new requirements, platforms such as Ebay and others could find it increasingly difficult to operate in the United Kingdom, due to the possibility of clients submitting undervalued invoices in order to safeguard profits. It is also unclear if such firms would themselves come under scrutiny for the actions of their members, as they are presently only platforms on which sellers operate. Sellers could also make use of proxy servers to advertise their wares as being sold from outside the U.K.’s tax jurisdiction, which poses cyber security risks to visitors as well. Entrepreneurs should liaise with the HMRC to further understand the regulations provided in the proposed action, and measures to be taken to safeguard their interests.

Tax On Online Sales