HMRC has information on thousands of online sellers who have failed to pay tax on sales over the internet
Sellers on eBay, Etsy and Facebook Marketplace are among thousands who have received HMRC nudge letters with details about their potential tax liability.
The campaign started in January and the letters contain individual case reference numbers, suggesting that HMRC has detailed information on sales activity and invites individuals to respond within 30 days summarising their tax position and make a voluntary disclosure of their undeclared income within 90 days.
The nudge letters state that HMRC knows it has ‘information that shows you’ve earned money (income) from Online Marketplace sales’ and that it ‘shows you have not told us about some or all of this income’.
The nudge letters invite individuals to complete a ‘certificate of tax position’ with the option to bring their tax affairs up to date, state that they have correctly declared all income, or that they have not declared their income. Individuals are given 30 days to respond with their certificate.
Beverley Wood, a tax director at Hillier Hopkins, said: ‘There has been a sharp increase in the number of online marketplace nudge letters landing on doorsteps and email inboxes in 2023, and they should not be ignored.
‘They suggest that HMRC has accessed sales data from these online platforms, and whilst it is not clear which third party has provided this information to HMRC, these platforms often include detailed sales history of its sellers in the public domain.
‘These letters have been specifically sent out to individuals for which HMRC holds information that it can use to open an investigation if individuals do not respond.’
Anyone can sell goods up to the value of £1,000 a year without having to pay tax. Sales over that amount should be declared and taxed as income.
Wood added: ‘The Covid pandemic and subsequent cost of living crisis has seen a significant increase in individuals supplementing their income by selling items online.
‘Some have built successful micro businesses, buying and selling everything from handbags to car parts. But when you reach that £1,000 a year threshold HMRC wants its share and has increasingly sophisticated technology to track down unpaid taxes.
‘If you have received a nudge letter do not ignore it. Do, however, take advice from an accountant before responding to ensure that you do not pay more tax than you should.’
It is important to take action when a letter is received.
Dawn Register, tax dispute resolution partner at BDO said: ‘With so much of the UK economy going online since the pandemic, it is surprising that HMRC has not focused fully on this area before.’
