Is the taxman coming after small online retailers?

Businesses selling items on platforms like eBay and Amazon Marketplace could be threatened by a further tax crackdown from HMRC.

MPs have called on the websites to do more to prevent tax avoidance on sales made online, with a particular focus on VAT.

A committee of MPs has looked at VAT liable sales on products originating outside the EU. HMRC estimates that uncollected VAT on such sales cost the Exchequer as much as £1.5 billion in 2015-16 alone.

Meg Hiller, chair of the Public Accounts Committee, said: “This is a double whammy for taxpayers. Overseas sellers that avoid VAT undercut the prices charged by small, law-abiding British businesses, hitting British jobs.

Hiller is concerned that this undermines the competitiveness of British businesses “at a time when the UK’s economy needs all the support it can get to compete outside the EU.”

Crackdown could impact UK sellers

But there is concern that the scope of the crackdown could widen to impact sellers within the UK, as part of a years-long campaign to collect the right tax from online marketplaces.

In January it was reported that HMRC had begun collecting data on users of eBay and other marketplaces, including sales receipts and payment histories from providers like PayPal and Worldpay.

Marketplaces can now be forced to hand over sellers’ data to HMRC on demand, and the information can be fed into the taxman’s growing database of online behaviour.

That data is then used to identify sellers who the Revenue can flag as potentially evading tax.

Are HMRC ‘spying’?

HMRC is now understood to have five analysis centres across the UK crunching information about online purchases. Speaking to the Mail in January, accountancy firm Deloitte said: “Lots of the data will be for perfectly honest, straightforward transactions. But, in the middle of it, HMRC may find evidence of tax evasion.

“However, it will not be going after the small-time sellers, such as someone getting rid of an iPhone on eBay. It’s looking for patterns.

“For example, if you are selling dozens every month, that would suggest you are running a business.”

How do you feel about the crackdown? Let us know in the comments.

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