New tax regulations from HMRC have been labelled "farfetched and absurd" by critics, with warnings that millions of people in the UK could be unexpectedly liable. The rules implement the EU's DAC7 directive, which mandates that digital platforms report the income of their users to tax authorities.
What is the DAC7 Directive?
The DAC7 rules require online platforms to collect and share data on "reportable sellers" who earn income through their services. This broad definition encompasses a wide range of activities, from professional holiday let agencies to individuals occasionally selling unwanted items on sites like eBay or Vinted. The directive aims to ensure tax fairness by cracking down on undeclared income from the digital economy.
A 'Disproportionate Burden' on Small Businesses
Business owners have reacted with anger, arguing the rules place a heavy and uncompensated administrative load on them. Kate Allen, Owner of Kingsbridge-based Finest Stays, stated that while the goal of tax fairness is sound, the reality is problematic.
"DAC7 places a disproportionate, unpaid compliance burden on holiday-lettings businesses; particularly smaller operators," she said. Allen explained that agencies are now forced to collect and store sensitive tax and identity data, shoulder significant GDPR and cybersecurity risks, and face penalties for errors often made by homeowners themselves.
"This is non-revenue work: tax enforcement quietly outsourced from government to private businesses," she added.
Casual Sellers Caught in the Net
Personal finance experts highlight a widespread lack of awareness among the public. Laura Purkess, Personal Finance Expert at Investing Insiders, pointed out the perceived absurdity for casual sellers.
"The vast majority of people have no idea that they could potentially be liable for tax for selling stuff on eBay or Vinted, because the idea sounds farfetched and absurd," Purkess said. She argued that people have sold items at car boot sales for decades without tax concerns, and selling similar items online at similar prices should not be treated differently.
She suggested a distinction should be made between casual resellers and those running a professional second-hand business, potentially using the national living wage as a threshold.
Critics Brand the Regulations an 'Abomination'
The criticism extends to landlords and investors. Kundan Bhaduri, Entrepreneur and Landlord at London-based The Kushman Group, was particularly scathing.
"The latest DAC7 regs are an abomination. They will treat a teenager selling their Pokemon cards the same as a mega corporation," Bhaduri stated. He warned that platforms must now collect personal data and file complex reports for even the smallest micro-businesses, while genuine tax avoiders may simply move operations offshore.
"This is designed to catch people whose only crime was decluttering their wardrobes without filing the correct forms," he concluded.
The overarching complaint from all quarters is that the HMRC tax rules lack nuance. Applying identical tax compliance standards to a professional holiday let company and someone clearing out their attic is seen as regulatory overreach. While the long-term effect may be a more level playing field and greater sector credibility, the immediate future appears to be one of increased cost, complexity, and frustration for millions.
