HMRC rolls out tax for side hustlers

[Saracen999]

I think you missed the part about how they are using "AI" to automate the decision making and are saying how they need less staff to do this.HMRC did a large IT "upgrade" to the Connect system in the years before all of this was announced. So they expect to get huge quantities of additional data which needs to be analysed. So what has happened in the past is not going to be a good indication of how things are going IMHO.



Its more like they are going to use their "new and improved by AI(tm)" automated system to just analyse and send stuff out in an automatic fashion.Then if there is a problem,it will be on the addressee to sort it out. But because they lack staff to manually check it will take ages to sort anything out. Then they will hope most people will just cave in and point to the infallible computer system. It's certainly happened elsewhere with IT upgrades. Like one recently in the news.

This is why I am cynical. Everytime they automate something,be it with the Post Office,or something else it ends up being a total cockup. I don't know whether people in the UK are gluttons for punishment,but I am not going to give them the benefit of the doubt. They never acknowledge the flaws of the systems they implement until they get taken to court,or they mess up so badly the media makes a big deal of it.

But much easier to go after the public(who are not to be trusted),when they lost £21 billion of taxpayers money over the Pandemic:
https://news.sky.com/story/21bn-of-t...chdog-12845271

However,these are the same lot who blamed inflation on people asking for more pay(and most of the rises were under it). Except the inflation was already happening before people asked for extra pay. Oh,yes nothing to do with rising energy costs caused by decades of several governments not planning energy policy properly(despite having our own oil,coal and gas unlike most European countries) and kicking the can down the road.

I take your point, but no, I didn't miss that. My perspective is that it always was on the taxpayer .... it is the taxpayer's responsibility to be declaring what they should be declaring, to be submitting data and/or sections of forms they should be submitting and if they don't, regardless of whether they knew they should or not, it'll be the taxpayer responsible for the outcome. There's a direct parallel with the old saying about ignorance of the law being no excuse. It's true for tax, too.

The lack of resources I referred to is in relation to actively pursuing tens or hundreds of thousands of people, or even millions, over what often (though, granted, not always) will be trivial sums.

Yes, it's obvious that the way they did things in the past isn't goig to cut it in the modern world and they're going to have to .... 'adapt'. That's what I think is going on here. Many, MANY more people will be indulging in 'side-hustles' than they did a few years ago, simply because the internet gives the infrastructure to do it. HMRC will be aware of that, and this is part of their reaction to doing it. Yes, they'll get much better 'intel', or at least, much more of it, and AI or not, yes it'll spit out more potential 'cases'.

But my point was the tax rules haven't changed (in much of any way significant to this, given that they're pretty much constantly evolving). If you were doing some sort of side hustle before, it either would or wouldn't generate a tax liability and whether it does or not hasn't changed. Within the rules and allowances, if theres tax due now, there was before. But there's a LOT more people in that category, so they've updated the methods for targeting them.

My view is that the vast bulk of those 'targeted' wil get a letter, saying something (in more flowery language) like "we think you might owe more tax, please get in touch or submit the necessary parts of a tax return". If you're in business, even for a side-hustle, I'd suggest not ignoring that. What they don't have the resources for, unless they've silenty recruited and trained whole armies of inspectors, is either "investigating", let alone visiting, everyone making a few quid on the side. Part of that is that not everybody selling stuff on eBay or whatever is actually indulging in a side-hustle, especially those loft-clearing, or whatever.

Yes, they'll get more data, and yes their "AI" (a hugely over-used term) will mine through it looking for people with bigger volumes or value of transactions. Which in turn will generate those letters, in all likelihood. As I said, it's a PR campaign. An analogy might be if you stop paying your TV licence - expect to get pestered by TV licencing because of it, but the vast bulk of their threatening letters are just that - letters. There generally is no 'investigation', even though they say there is.

In quite a lot of cases, I'd expect those HMRC letters to work, and people that genuinely didn't realise that what they're doing might result in tax to react. Some, of course, will have known that and figure they can continue evading tax, and some may be right. Some, whether due to scale or just because they won the investigation 'lottery' actually will get investigated an/or visited, and if found to owe tax, will end up paying it .... and interest and penalties, if due.

Others may indeed just be loft-clearing and have such activities noticed, and get a letter. I'd expect a response to that explaining that you're loft-clearing and not trading, or side-hustling to be sufficient .... provided it's true. They might decide to test that hypothesis, but there's nothing new in that, either.

It has long been the case, and I mean decades, that HMRC have had considerable powers to mess people about, should they choose to. In many ways, more than the police. I had a letter a couple of decades back "estimating" that I owed £x in tax. My choice was to pay it, or fight it and demonstrate why it wasn't the case. i.e., kinda found myself found 'guilty' until/unless I could prove my 'innocence'.

I booked an appoinment at my local tax office, bundled up my paper documentation and laptop with accounting software on it, and went to the appointment and said, paraphrasing :-

- here's what happened,
- here's all my records,
- here's my computerised accounts ...

- what would you like to see?

Half an our later I was on my way home, and a letter withdrawing the "assessment" arrived a couple of weeks later, outstanding tax = £0.00.

I had been (due to illness) a bit, ummm, tardy with some returns. Technically, I was liable for (modest) penalties simply because those returns were late, regardless of why. But, I explained the circumstances, outlined the (utterly genuine) illness and despite technically owing those late payment penalties, regardless of why they were late, had them withdrawn. I still am not quite sure how/why because I thought they were mandatory. There appears to be, or have been, some wiggle-room.

Anyway, my view is STILL that :-

- not much has changed, except a lot more people are side-hustling
- HMRC have a new data source, but they always were inventive
- yes, the "AI" label means it's computer-generated but a true AI should be able to tell loft-clearers from hustles.
- if tax was due before, it still is but HMRC have a new way to chase it,
- if it wasn't before, it still isn't
- tax rules haven't (much) changed
- despite understanding your cyncism, I ssuspect it's misplaced. Time will tell.
- both HMRC have always been eminently fair and reasonable with me, during 30-ish years of income tax
- HMRC have been very reasonable with me, during a similar 30 years of being VAT-registered
- generally, those doing the right thing, or at least genuiney trying to, don't have much to worry about
- those that genuinely do have something to worry about, well, if they paid what's due, they wouldn't have to worry.

What undoubtedly is true, but again it always was the case, is that the hassle, the paperwork, the administration of tax matters can be a collosal time-sink and a mahoooosive PITA. Any small trader (like me) that's VAT-registered is effectively an unpaid tax collector for HMRC. Anyone running a "side hustle" MIGHT have a tax liability but that hasn't changed at all. Yes, HMRC have updated their methodologies a bit but the world has changed so it's unrealistic to expect them not to.

And if those changes result in more people that should be paying tax on side-hustles actually doing so, I'm just fine and dandy with that. I always paid what was due, whether I liked it or not, and see no reason why anybody else shouldn't. If they catch more dodgers this way, great. It's a bit fairer on everybody else, then.

[badass]

You have not read anything I said,so next time read what I said. People need proper clarification which the HMRC and government are not providing. Your argument "it will be fine bro",and then your nice insult is funny when you say this:



Also,learn how to talk to people. Remember you are talking to random people on a forum. Just because the people around put up with your rudeness,don't think strangers will.



Not a single person is asking,IF HMRC ask you for evidence,what is the evidence they are asking for? People are just parroting the HMRC line and/or hurling insults about this?

One of the ways to prove you are not selling for profit,is proof of purchase. But what if you don't have it because the item is old(lost) or the receipts are faded. Just having a decent old hifi system can easily push you over £1000 or even £2000. Classic turntables for example hold their value. Camera equipment,etc.

Also is inflation taken into consideration? £2000 24 years ago is £3600 now.OFC not.

So anything under £3600 is technically not a profit and you are making a loss on the purchase price.

I think you misinterpreted. No insults in my posts that I can see? I suspect you have been trying to read too far between the lines and found intent that simply does not exist. For reference that is not intended as an insult. It's just a suggestion as to what may have happened.

[sammyc]

Talking to myself partly here in the course of getting head round this:

So if the gist is 30 items / 1700 ish or whatever before ebay will pass your info on, and they pass on that you have sold 30 bits of lego for £1 each, then in theory the AI or something or someone will clock the trivial amount of money and just spit out the info? That's a lot of pointless passing on of info, & as others have said, can't see the logic of having the item limit and not just a straightforward financial limit.

Presumably if you have more than one ebay the sums/number of items will be collated together automatically as one person (have never thought much about how far this is done already, eg if for some odd reason you ran one account beautifully and one badly, to the point of suspension, would they suspend the 100% feedback account as it's yours too?) - otherwise people would just run off and start 10.

So what happens under new rules if you have one ebay one depop one vinted etc? Leaving aside for a minute the onus on the seller to self-report if trading &c.

Don't think this will affect me particularly at the moment but still interested.

[Jonj1611]

Vinted, Gumtree etc are all excluded from having to pass on any information as they don't collect payments like eBay etc do

[Percy1983]

The way I see it is its nothing to worry about, as it is I am currently sorting a load of old lego sets and it appears some may be worth a lot of money and if I sell all at once I will probably hit limits, if I do hit limits and get a letter i will fill out a form saying it was a clear out of old personal lego, job done.

[sammyc]

Vinted, Gumtree etc are all excluded from having to pass on any information as they don't collect payments like eBay etc do

Vinted not a good example then, my mistake, still interested in what happens to a slew of accounts across all of the included platforms.

edit: actually https://www.moneysavingexpert.com/ne...b-report-hmrc/ which is what I thought I'd read.

[AGTDenton]

Just to confirm Vinted does facilitate payments like eBay

[Jonj1611]

Ah good correction, I don't use Vinted so was taking a guess on that one.

Don't worry I am sure they are working out a way to tax the air that we breathe.

[Percy1983]

Ah good correction, I don't use Vinted so was taking a guess on that one.

Don't worry I am sure they are working out a way to tax the air that we breathe.

Nope just the tax you should be paying on trading income.

[Jonj1611]

Cool

[sammyc]

Presumably if you have more than one ebay the sums/number of items will be collated together automatically as one person [..] otherwise people would just run off and start 10.

So what happens under new rules if you have one ebay one depop one vinted etc? Leaving aside for a minute the onus on the seller to self-report if trading &c.

Well as no-one has an answer or educated guess on this one simplish point*, and I can't find anything after a moderately decent look, then it speaks volumes for how clear as mud the rules & regs are

*not to say you're all obliged to have this info at your fingertips ofc but it usually follows that if it were dead simple someone would know just from seeing it in passing, it having cropped up etc

[Saracen999]

Well as no-one has an answer or educated guess on this one simplish point*, and I can't find anything after a moderately decent look, then it speaks volumes for how clear as mud the rules & regs are
...

I can hazard a guess, but I make no claim as to how educated it is - my experience in most of the stuff is ancient. I mean, Noah was still gathering wood for his 'Ark'.

Is it "automatically" collated? It's the 'automatically' that worries me. I doubt it.

But, I suspect you might have the focus of this, by HMRC, backwards.

One point was referenced by Percy with "Nope just the tax you should be paying on trading income." The obligation is on the tax-payer (or he/she that should be paying it) to declare it, regardless of how the transactions are broken down beween sites. Which sounds like the question is whether this "automatic"" data transfer will trigger HMRC if it's spread around? And that answer would require knowledge of HMRC's internal workings. I sure don't have that (thesee days) and the little I do have is, as I said, ancient.

BUT .... my experiences with HMRC says that while large numbers or values of transactions is certainly one potential trigger for them shining their spotlight on a given individual, it isn't the only one. It can happen that relatively small amounts, volumes or values can trigger a closer look, not least because that kind of statistical approach, just like an auditor finding errors in a small sample of test items, might indicate a one-off problem OR be an example of a much larger but unnoticed issue.

In other words, unless you (or someone) knows how HMRC procedures currently work, I don't think it's possible to answer that question, because it depends on exactly what their trigger criteria are. It could be as simple as something like "computer spits out 10,000 possible traders wih undeclared income, let's examine 100 and see what pops out". Or not.

So my recommendation, from my perspective, is to be overtly up-front with HMRC because it's better (IMHO) to tell them more than they want to know than to be caught apparently hiding stuff. And, if the sums are trivial it's not worth the risk of getting audited several years running, and if the sums are non-trivial, personally, for my own peace of mind, that is not a risk I never felt like running, because I know how sneaky HMRC can be, if they sniff deceit, or tax evasion. For me, the risk v. reward comparison made it a no-brainer not to mess them about, because if they decide to mess back, they can make life truly miserable for the unfortunate individual on the receiving end of it..

[sammyc]

Thanks

It shouldn't affect me at the moment (I have had periods of being more active on ebay etc in the past than I am right this minute) so I was asking really from the 'interested to know' angle, of what's to stop someone who is trading, and trying to get around this, just having an account on every possible platform there is. It sounds in theory like that could mean they're able to trade just under the thresholds on each, and sell a fair bit without any one platform sending on the data, while one single-account person could go £1 over and have their info sent on.

If I were to sell more this or next year then what I find objectionable is that I already know HMRC don't need my data - it will be loft clearing or whatever - but it will be sent anyway. I may then (or much more likely not) be called on to clarify but I would much rather unnecessary info not be passed on, on principle, I imagine many people feel the same.

[Saracen999]

Thanks

It shouldn't affect me at the moment (I have had periods of being more active on ebay etc in the past than I am right this minute) so I was asking really from the 'interested to know' angle, of what's to stop someone who is trading, and trying to get around this, just having an account on every possible platform there is. It sounds in theory like that could mean they're able to trade just under the thresholds on each, and sell a fair bit without any one platform sending on the data, while one single-account person could go £1 over and have their info sent on.

If I were to sell more this or next year then what I find objectionable is that I already know HMRC don't need my data - it will be loft clearing or whatever - but it will be sent anyway. I may then (or much more likely not) be called on to clarify but I would much rather unnecessary info not be passed on, on principle, I imagine many people feel the same.

From a privacy perspective, and in most circumstances, I entirey agree about "unnecessary info". But personally, from a tax perspective.

If it helps, here's two quick personal experiences with HMRC :-

Anecdote 1)

Not long after I started trading (in the '80s), I got a 'visit', which I'd describee as a kind-of possiby pre-audit sounding out. We had a little chat, then the chap asked if I had accounts, invoices etc. Well, I trained as a Chartered Accountant back in pre-history so, yeah, I did. He looked through the invoices, and printed reports (yup, I was computerised even back then) and after a while, asked if I had a computer? It seemed like a strange question having just thumbed through prinouts, but i answered it straight, with "Yes. It's upstais. Need to see it?".

"Oh no, that's alright. But .... I don't see the invoice for it in the accounts ... do you use it for business?" he asked.

"Yes, but I bought it before I started the business, so I didn't include it".

"But you use it for business?", he persisted.

"Yes", says I. "I use it for admin like accounts, I use it for WP etc, for taching myself but also for games and so on".

"If it's largely for business, there's no reason to not claim for it. It's a valid pre-incorporation expense" he said. "Oh, and put it on your VAT claim too for HM Customs, too. I'll put a note on the file that I suggested you do so."

So I did. I got the VAT back, and wrote down te capital value against trading profits over several years. I thought that was unnecessary info. He didn't.


Anecdote 2)

Back in my accountancy training, we were shown a video that I seem to remember was a genuine Inland Revenue training film. It was certainly shown as part of our tax training, by an Inland Revenueinspector.

It was an interview with a tax-payer, supposedly of a real case, called in for a "routine" chat. I got one of these "chats" for real some years later. Anyway, it started very amicably, with an offer of tea or coffee and, would you like biscuits? Drinks arrive, sit and chat fora while, mostly about last year's holiday. But it was a friendly chat and range widely.

After about 10 minutes, they got down to business, looked at the most submitted tax return and the supporting accounts. After a bit, the Inland Revenue bloke says,"So, from your last few years you typically made £x per year profit but, you've just told me you take two foreign holidays a year, drink 'y' pints a week, smoke 'z' cigarettes, bought a nearly new car, have two dogs and keep expensive tropical fish.
.
.
.
.
.
Care to explain how you can afford to live that that on the income you've been declaring? What else are we going to find if we actually start digging"

The silence that followed was .... illuminating.


So, my take-away from that is that NO chat with them is ever entirely informal, and it's one of te reasons I decided to be scrupulously and maybe excessively open with them. I'd make a lousy tax cheat, because I'd forget the lies I'd told and trip myself up, probably in 5 minutes flat. So telling them anything I even emotely thought they might find relevant, was far safer than not telling them something that I wanted to hide.

My experience (and others might have different experiences) was that they know full well tax laws are horribly complex, and that most people barely understand even the most basics. I'd had 3 years Chartered Accountancy training of whih, oh dunno, 15% was in tax. I mean, I spent 6 months in my firm's tax department, though a fair bit was neither income tax nor VAT. It's way out of date now, obviously, but back then I sure couldn't convincing claim complete innocence and "sorry, I didn't realise ...". It wouldn't have worked.

My experience, therefore, was that for small and especially part-time traders, they KNOW most people don't really understand what they should be doing, and are pretty forgiving, especially of genuine mistakes or understandable ack of knowledge. But that understanding and leniency can evaporate pretty fast if they think people are taking the ... erm .... pee.

My general advice would therefore be, not to take liberties with declaring income, and to err on the safe side of disclosure for peace of mind, if nothing else. But for anyone really determined to dodge tax, do everything you can to understand how HMRC think and work, and are trained, because unlike most of us, they do do this stuff for a living, and unless someone is really, REALLY good, whatever they can think of, HMRC will have seen thousands of times before.

I get why really wealthy individduals pay to accountants to legally not pay what they don't need to pay .... and I mean advice on legal avoidance, not illegal evasion. In their circumstances I might, too. But I could never afford that kind of lawyer or accountant, so the safest way was to avoid taking risks in the first place, especially for sums it wasn't worth taking risks over.