Digital platform reporting rules: an IT contractor’s guide

HMRC reporting rules for digital platforms are a must-know for IT contractors using PeoplePerHour, Upwork and the like. LITRG tells us why, exclusively.

Some new rules came into force in the UK on January 1st, 2024, and they require online platforms to report information to HMRC about sellers, potentially including IT contractors, from January 1st, 2025.

These HMRC rules are the “Reporting Rules for Digital Platforms” and they apply to “Entity Sellers” — as well as individual sellers, writes chartered tax adviser Meredith McCammond, technical officer at LITRG.

What do the new digital platform reporting rules mean, in practice?

Introduced into UK law on Jan 1st with the first reporting to HMRC due from Jan 1st 2025, the regulations mean HMRC will have access to more data than ever before on the money earned by platform users.

And by ‘platform users,’ yes, that means freelancers and contractors too, typically when they work through online platforms.

Where reporting rules for digital platforms came from…

These rules weren’t of HMRC’s making.

They originate from the OECD, the Organisation for Economic Co-operation and Development.

Now in force, the framework requires online platforms to collect information on the money made by those offering accommodation, transport and personal services through platforms. And then those parties must report the information to the tax authorities.

Do digital platform reporting rules apply to you?

These rules also apply to those selling goods if they make €2,000 (approximately £1,700) or more as a result and complete 30 or more transactions within a calendar year.

Because the UK has signed up to these reporting rules for digital platforms, online job, project or skills platforms and marketplaces, like Fiverr, Upwork and PeopleperHour, are now required to collect, and soon report, the following information about sellers:

Under the rules, what information does HMRC collect and receive?

If you’re an individual seller:

• full name
• address where you normally live
• date of birth
• tax identification number

N.B. HMRC’s guidance says that this number will usually be a National Insurance Number, although we understand some platforms may be asking for a Unique Taxpayer Reference number instead.

As an “Entity-Seller” (such as a contractor limited company):

• legal business name
• main business address
• tax identification number (company registration number for a UK limited company)

Digital platforms must report the following five strands of information…

In addition, for both groups, the platform needs to collect and report the following five strands of information:

• VAT number, if available (please note — this does not mean that you have to be VAT-registered);
• the total amount paid to you for the reporting calendar year;
• the number of transactions you received payment for;
• any fees, commissions, or taxes withheld or charged by the online platform; and finally,
• bank account details to which amounts were paid.

When will my details as a platform user be reported to HMRC?

Reports to HMRC are made annually in January for the previous calendar year.

So the first reports under the new rules will be filed by the end of January 2025.

So-called “existing sellers” (that’s people who were registered with the platform before January 1st 2024), may receive their first reports in January 2026 for the 2025 calendar year instead.

Does a digital platform caught by the reporting rules have a duty to users?

Yes, where a platform reports your information to HMRC, they should provide you with a copy of the information at the same time.

Once HMRC has received this information from the online platforms, they can use it to identify and risk-assess individuals and companies.

But be aware, HMRC can also exchange it with other tax authorities in foreign countries that have also signed up to the new OECD framework. This means such overseas authorities should be aware of money that people who live in their country are making from UK platforms (and vice versa).

What does HMRC do with the data obtained from digital reporting rules?

At this stage, it is not clear how useful the data will be to the tax authority.

But, almost regardless of what exactly HMRC will do with your data or what their compliance approach will be, the new rules mean that if you have not been declaring your platform income properly and paying the appropriate tax, then you are more likely to get found out, or face action by HMRC.

If you have already been declaring your income, as required, then you don’t need to do anything differently.

If you haven’t, then you should take steps as soon as possible to bring your tax affairs up-to-date.

So consider getting some professional advice if necessary.

What if I work for myself — as a sole trader or limited company?

If you are a sole trader on a low income, help may be available to you from TaxAid.

But IT contractors please note — due to limited resources, TaxAid cannot offer help, advice, or support with corporation tax or company issues.

That’s not to say IT contractors operating as a limited company, and using a digital platform for work, should not act if they suspect they have not been declaring their income as required.

How much is HMRC investing to enforce digital platform reporting rules?

HMRC has confirmed that it will invest £39.9million (including 24 full-time equivalent staff) in operating and enforcing the new digital platform reporting, rules.

It is therefore extremely important to take the rules seriously, particularly with the first reporting deadline fast-approaching.

You can find more about the new requirements on platforms and the actions they have to take by looking at this HMRC guidance. More technical guidance is in this HMRC manual.

Finally, don’t skimp…

Basic guidance on the new rules for sellers of services via online platforms is available here on .gov.

But to reiterate — this is not an area of tax compliance to skimp on, assuming you wish to keep using job-related, or project and skills platforms as an IT contractor without the nasty prospect of a tax bill that could wipe out any income you’ve generated — and worse.