HMRC has ramped up its campaign to collect taxes it believes have not been paid from individuals selling goods on online marketplaces with a dramatic increase in new nudge letters. If you receive one of these 'nudge letters' it should not be ignored, says Beverley Wood.
The campaign is targeting those selling goods on marketplaces such eBay, Etsy and Facebook Marketplace, and is believed to be supported by sales data from popular online marketplaces. Hundreds and perhaps thousands of letters have been dropping on doormats across the country throughout April.
The nudge letters come with individual case reference numbers, suggesting that HMRC has detailed information on sales activity. They invite individuals to respond within 30 days summarising their tax position and make a voluntary disclosure of their undeclared income within 90 days.
The 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". They invite individuals to complete a "certificate of tax position" with the option to bring tax affairs up to date, that you have correctly declared all income, or that you have not declared your income. Individuals are given 30 days to respond with their certificate.
The letters seem to 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. The letters have been specifically sent out to individuals in 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.
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. And of course, if you have set up a business, HMRC will expect you to meet all the relevant compliance and tax obligations.
Hillier Hopkins offers the following advice. Do not ignore these nudge letters if you receive one. Do, however, take advice from an accountant before responding to ensure that you do not pay more tax than you should.
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