HM Revenue and Customs has launched a consultation on extending its powers to collect more data from internet companies. In a bid to crackdown on tax evasion, the government wants more powers to force internet companies to provide more information on businesses and individuals selling goods and services online.
HMRC is targeting businesses that have failed to register for tax, as well as individuals who do not declare the money they make on the internet. Referring to this as the ‘hidden economy’, they think it could equate to an estimated £5.9 billion a year in unpaid tax.
Although no specific companies have been named, it is likely that sellers operating on sites such as eBay, Gumtree, holiday letting websites, price comparison sites and other online retailers will be targeted. As will Smartphone App stores run by companies such as Apple and Google. The changes will mean that thousands of people who let out their homes online or sell goods on sites such as eBay will soon be likely to have their affairs scrutinised by HMRC.
In the consultation document, HMRC suggests that data plays a key role in enabling it to detect individuals and businesses who fail to pay tax. They want to collect bulk information from internet companies who act as intermediaries or provide electronic payment services, such as PayPal. This information will contain the details of millions of online transactions. Existing laws do allow HMRC to access certain data, but it is seeking to extend its reach considerably. HMRC gained powers to access information concerning credit and debit card transactions online, back in 2013. This resulted in 14,000 individuals being contacted regarding tax bills that were potentially outstanding. However, the existing laws don’t cover companies that provide electronic payment services, such as PayPal. Over 20 million people in the UK use PayPal to pay for goods and services online, and it is one of the main payment methods used on eBay.
The consultation document suggests that HMRC will be able to use the new powers to collect the names, addresses and details of the revenue of any businesses and individuals using the websites concerned.
The consultation document published online states that “Data can be particularly powerful when it is collected from third parties who facilitate trade, either between businesses, or between businesses and consumers… This is because they can provide information in bulk, about the activity of large numbers of traders, and because third party data can be used as an independent check against the data that taxpayers themselves report to HMRC.”
HMRC insist that individuals selling personal possessions online will not be targeted. Rather, they are cracking down on businesses that fail to pay the tax they owe. They assert that they are not interested in finding out what people are buying online, but, instead, what is being sold and not declared.
The Telegraph has reported that senior tax accountants have told the paper that the scale of the data collection amounts to a ‘radical’ change in the way that HMRC conducts its affairs. Expressing concern, they warned that small businesses and hobbyists could receive ‘frightening’ letters demanding payment of taxes that they don’t necessarily owe.
Concerns have also been expressed about the ability of HMRC to cope with the extent of the data, potentially leading to significant security and privacy risks. Back in 2007, HMRC lost data disks which contained the personal information of 25 million people, including their addresses, date of birth, bank account details and national insurance numbers.
The 12 week consultation runs until the 14th October and the new law is likely to come into force next year.