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HMRC to further investigate transactions of online retailers

HM Revenue and Customs (HMRC) is set to take a closer look at online transactions for sites like eBay, Paypal, holiday letting sites and other internet retailers in one of the “biggest tax crackdowns in history”.

The tax authority aims to collect “bulk” information from internet companies, targeting tens of thousands of self-employed sellers who fail to declare income they make on the internet – costing HMRC billions of pounds a year.

The new powers will enable HMRC to obtain information from Paypal – the online payment company owned by eBay – smartphone app stores run by Apple and Google, along with holiday comparison websites and a raft of additional online retailers.

In addition, thousands of Britons who let out their homes on the internet or sell goods on eBay without paying tax will be targeted and have their affairs heavily scrutinised.

A recent consultation published by HMRC states the tax authority will be able to collect the names, addresses and revenues of any businesses which use the websites.

They will subsequently compare this data with tax returns filed by the businesses and use it to pursue those who have failed to pay.

Treasury forecasts anticipate recouping £860m in the next five years as it seeks to ensure the new generation of online businesses pay their full share of tax.

The Telegraph suggests that many of the websites are used by professionals who set up small businesseses on these portals to bolster their income.

In some instances, people have been targeted who make as little as £100 profit online. Any earnings above an individual’s tax-free personal allowance - £10,600 for the 2015-16 tax year – are taxable if the money made is considered a business profit.

Anita Monteith, tax expert, Institute of Chartered Accountants in England and Wales (ICAEW), said: “Where people have a business they should be paying tax.

“My worry will be that we will be frightening people because they don’t like getting a letter from HMRC.

“I would like to see if this follows through much more and better information coming from HMRC.”

An HMRC spokesman said: “We want businesses to pay their fair share and ensure legitimate traders are not left struggling to compete against tax cheats.

“That’s why we’re consulting on updating HMRC’s existing data collection powers for the digital age.

“The information will only be used to identify businesses that are breaking the law by evading paying the tax they owe. We cannot find out what people buy, only what businesses have sold, but not declared.”

A source close to HMRC said that it already collects and processes “large amounts of sensitive data” and takes data security “extremely seriously”.

A spokesman for eBay added: “It is important that anyone selling professionally on eBay operates in compliance with the law.

“If you are just selling unwanted items for spare cash, then you may not need to worry about tax. If you are buying or selling an item with a view to making a profit, then you may be able to pay tax on any profits you make and you may need to account for VAT on your activity.”

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