Online transactions have taken over.
More than three quarters of Britons (77%) made online purchases last year and, in 2015, the UK had the third largest e-commerce market in the world – worth more than £500,000bn.
Online platforms, such as eBay, Etsy and Gumtree, that enable the sale and rent of goods and services are good for the economy and consumer – both of whom benefit from lower prices and more choice.
However, a minority of users – who have earned money without an intermediary to govern their tax affairs – either aren’t aware of their tax obligations or choose to avoid paying their fair share.
Between 13 March and 8 June, HMRC called for evidence to better understand the relationships between online platforms and their users, and the measures already in place to help users understand and meet tax obligations. HMRC’s ultimate goal is to explore how online platforms could work with HMRC and taxpayers to make tax obligations more explicit.
Calling for an overhaul
In response to the consultation, leading figures from the hospitality sector have been vocal in condemning the current tax system and calling for an overhaul.
UKHospitality chief executive Kate Nicholls responded by highlighting the failure of the current system to ensure equality between online and offline businesses by ensuring online transactions are subject to tax.
“There needs to be a level playing field between online and property-based businesses and digital companies. The current tax system is completely inadequate to deal with the complexities of the digital age and hospitality businesses find themselves at a disadvantage.
“The Government must address this inequality and this includes ensuring that the appropriate tax is collected when online platforms are used. Whether through ignorance or as a result of deliberate avoidance, online transactions are frequently not subjected to tax.
“As it stands, there is too great an opportunity for online transactions to avoid paying tax. Not only does this deprive the Exchequer of vital tax revenues, it creates a plainly unfair disparity between online and hospitality businesses that must comply with rigorous legislation.
“The Government must ensure a tax environment that is fair and transparent. We need an overhaul of the tax system to reflect the way in which business is carried out in the 21st century and we need it now.”
British Beer & Pub Association (BBPA) chief executive Brigid Simmonds echoed Nicholls’ sentiments, stating: “The current taxation system is not fit for the digital age; roughly £1 of every £3 made in the pub goes to the taxman.
“The great British pub, the majority of which are SMEs, is unfairly burdened by the current taxation system.
“We are continuing to campaign for a tax system that allows the beer and pub sector to thrive, boosting the already large contribution the sector makes to the UK economy.”
Unfit for purpose
Shepherd Neame chief executive Jonathan Neame added: “UKHospitality and other bodies, such as the BBPA, are right to raise the issue that the rates system is unfit for purpose and needs long-term reform.
“The hospitality sector and, specifically, pubs are paying a disproportionate amount of rates compared with other retailers.
“This is in part because a significant part of their turnover is excise duty.
“A more sensible rates system should be created to ensure a more level playing field for pubs and bars.”
Following the consultation’s conclusion, and when approached for comment on what possible next steps could be, an HMRC spokesperson said: “We are considering all comments received, and will respond in due course.”