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Are you easy pickings for the taxman? Digital traders, beware!

HMRC is gunning for 14,000 online traders it believes are tax-dodgers

RSS 03 June 2015
After the Conservative's election promises of freezing income tax, VAT and National Insurance Contributions, we knew that HMRC would leave no other stone unturned. One area of investigation we didn't expect to appear with such prominence so early on in the game was that of online trading.

We're not talking Forex, although no doubt Big Brother has details of individual shares and investors in the stock market. Understandable, as most contractors are indeed shareholders in their own businesses.

No, many had pegged big, global tax-avoiding business as HMRC's obvious first target. Google, Amazon, Starbucks - we're familiar with them all, by now.

But the politicians have to be careful, here. So many of those in government have inherited familial wealth from offshore trusts, those particular loopholes may be slower to close.

So, what type of online trading is HMRC gunning for?

With the vast explosion of the Interweb, the opportunity for people to create hand-crafted businesses has sky-rocketed in twain. With shop fronts like Etsy and Shopify and the more traditional eBay and Amazon Stores, internet marketers don't even have to hold stock.

These platforms are geared up for entrepreneurs to easily create a shop-front for the products they want to sell. Then, 'drive traffic' through referrals, with all interactions taken care of in the back end by the merchant, the actual stock holder.

Alternatively, there's the localised buying and selling outlet, Gumtree. Again, this platform started out as a place to get rid of your unwanted belongings.

When opportunists saw readies passing between buyer and seller, Gumtree also became an outlet suited to the buy cheap/sell on at a profit brigade.

Another growing market is Facebook. Not official Facebook Fanpages created by a brand or business. There are many, many local "Buy, Sell, Swap" communities, too. These gatherings are goldmines for anyone in the internet marketing arena who have friends and family oblivious to online or affiliate marketing.

So how does the taxman keep trace?

If you've been freelancing a while, you've probably got a profile on one of the hundreds of online digital agencies. Has it struck you that the respective platforms upon which you're plying your trade may well be passing your info back to HMRC?

Now, this might come as a shock, but the chances are your details will be, if they're not already, plugged into the taxman's database. Those who created the site never meant for it to be that way. But we're in a world of Big Data, and HMRC is catching on quick.

Richard Dyson detailed how he suspected The Revenue collects your data in a thought-provoking article in The Telegraph last summer. Back then, he related an occasion when HMRC issued 40,000 letters to those it believed were failing to declare all of their income.

Fast forward to today. HMRC has embarked on another mass mailing campaign, online traders the target this time around. Some 14,000 potential digital tax evaders have received letters this year asking them to declare their online earnings.

If you've set up shop via a business account on any one of the aforementioned platforms, you'd better believe that you're on the radar.

If the government asks Amazon, eBay et al for details of those using their platform to sell at a profit, they're obliged to give it. As The Telegraph alludes, even if it's only to set up to sell our odds and sods, and even if the vending platforms never meant to become a source for Big Data analytics, it doesn't matter. If you look like a business, you're accountable to the taxman.

As with everything HMRC, the impression is that they try to build up a complete picture of an individual before loading the gun. There are those who'll argue, with merit, that said weapon is a Tommy Gun. Moreover, that the taxman has no problem in strafing everyone á la Rambo in First Blood to get to the guilty parties.

In our community, many freelance writers top up their income with affiliate or associate sales. Make sure you've got the documentation to support those earnings. No matter how pitiful they may seem to you, it's better to prepare for a trifling tax cut than a rifling rebut.

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