HMRC targets online sellers and content creators/influencers

What UK tax am I required to pay on online income?

Digital marketplace sales

A digital marketplace is any platform bringing buyers and sellers together online to transact products or services. The classic example is eBay. While the sales can be made anywhere in the world, individuals who are UK resident and undertake a trading activity are required to report their worldwide sales to HMRC and pay income tax on their profits. UK resident companies are also subject to corporation tax on their worldwide sales, including those sold via digital marketplaces.

Many digital marketplaces will have provided sales information to HMRC, who’ll have been reviewing this data and comparing this to submitted tax returns.

Digital content earnings

In addition to selling products online, many individuals now earn a living by creating digital content and influencing. This could be advertising income based on content views on platforms such as YouTube, TikTok, and Instagram, or subscription income for access to digital content such as OnlyFans.

Again, those who are UK resident and trade online are required to declare their profits to HMRC and pay income tax.

How can I tell if i'm trading?

Not everyone selling items online will consider themselves as ‘trading’. You could be clearing the loft or pursuing a hobby in your spare time. HMRC apply a number of tests, known as the ‘badges of trade’, to determine whether an activity should be considered a taxable trade rather than just a hobby. As a general rule, if you're consistently doing something with a view to make a profit, HMRC will likely consider this a trading activity.  

A tax-free trading allowance of £1,000 per tax year is currently in place. Therefore, if you receive more than £1,000 per year from any activity, you should review your position.

What’s happening?

HMRC has reviewed the data it receives from digital marketplaces and online content platforms to identify the individuals it believes have failed to report their online earnings. These individuals will receive a ‘nudge’ letter that contains a Certificate of Tax Position.

What should I do?

If you’ve received a letter from HMRC, it’s important to note that there’s no statutory requirement to complete a Certificate of Tax Position. 

However, these letters shouldn’t be ignored as HMRC will follow up with those who don’t respond, potentially opening their own investigation. It’s therefore essential that appropriate specialist advice is taken on how to respond.

If any disclosure is required, it’s important that this process is managed carefully and that the letter is responded to within the stated deadline. By making a disclosure, you’ll have control over the process and will reach a settlement quicker than if HMRC were to open an investigation. This is because you determine the potential lost revenue, the behaviour that led to the non-compliance, and the level of tax-geared penalty.

If you knew at the time you should have declared your online earnings but consciously chose not to do so, or if you subsequently discovered this but again chose not to actively correct matters, HMRC’s Code of Practice 9 (COP9) Contractual Disclosure Facility is the most appropriate course of action to ensure you’re fully protected. If this is something that applies to your circumstances, we strongly recommend you seek expert advice before contacting HMRC.

How we can help

Our award-winning Tax Investigations and Dispute Resolution team can guide you through the disclosure process. Our disclosure experts have a proven track record of assisting clients with disclosures of untaxed income. We are able to:

• Conduct a review of your tax affairs to identify any issues that need to be disclosed
• Register you for the appropriate HMRC disclosure facility
• Prepare and submit a disclosure that minimises your exposure to unnecessary tax, interest and penalties
• If needed, negotiate a time-to-pay arrangement that is affordable according to your needs and personal circumstances

Get help with your online marketplace sales or income from creating content on digital platforms letter today. Please call +44 020 3820 4718 or fill in the form below.