Small-scale internet traders, including individuals and businesses who sell goods on websites such as eBay and Amazon, are being hit with ‘tougher penalties’ than larger businesses if they do not declare their income and pay the appropriate tax on sales, according to a new study.
The research, which has attracted much media attention of late, suggests that HM Revenue & Customs (HMRC) is issuing increasingly hefty penalties to such traders under its ‘deliberate defaulters’ programme, which delivers fines to those who consciously avoid paying tax.
According to reports, ‘defaulters’ who sell goods online are being issued with penalties demanding around 59 per cent of tax owed in addition to the initial amount.
In comparison, larger businesses are rarely asked to pay fines of more than 50 per cent of the tax due. In fact, reports suggest that in some cases such firms will be fined as little as 35 per cent.
Concerns have been raised that many online traders may be unaware that they need to pay tax on their online income at all – or otherwise believe that online earnings will go unnoticed by HMRC.
However, back in January, the tax authority announced that it had begun collecting data on the users of online marketplaces such as eBay and Amazon as part of a long-running campaign to tackle tax avoidance.
A HMRC spokesperson said: “We are clear that everyone must play by the same rules, and pay the taxes due under the law. This applies to online trading and to more traditional platforms.
“When you are selling goods for profit, HMRC must be notified through the trader’s tax return,” they added.
“Our penalties are focused on the minority of people who try to get around the rules. Our most recent figures show that last year HMRC brought in a record £26bn in extra tax for our public services, money that would otherwise have gone unpaid”.
Tax Partner, Phil Blackburn, said: “We must consider both sides of the coin; there will of course be those who consciously avoid their tax liabilities, but it’s certainly true that many will simply be unaware of their obligations and have little idea of where to start when it comes to dealing with HMRC. How a taxpayer responds to HMRC enquiries can be critical to minimising the level of penalties that HMRC seek to collect.”
“The Revenue’s crackdown is only gaining prominence as they continue to find new groups to target and harsher penalties to implement”
“If you’re a small-scale business, trading online, and you are concerned about your tax liabilities or indeed unsure of your obligations, you should seek professional advice at the earliest opportunity.”
Here at George Hay we can help you to understand your tax obligations, as well as assisting with tax planning and, where appropriate, compliantly reducing your liabilities. We also have years of experience in handling business and personal tax enquiries, liaising with HMRC on behalf of our clients and helping them to reach a satisfactory conclusion.
For further information about our Tax Enquiries and Investigation services for businesses and individuals, click here.