Clause 125 introduces a new power that will enable the Government to subsequently make regulations to implement international reporting rules for digital platforms following consultation—in particular, the OECD model rules for reporting by platform operators with respect to sellers in the sharing and gig economy are in scope here. As announced at Budget, the Government will consult on the implementation of these OECD rules in the summer.
The OECD rules require digital platforms to report information about the income of sellers providing services on these platforms to their tax authority. The rules affect platforms that facilitate the provision of services such as taxi and private hire services, food delivery services, freelance services and short-term letting of accommodation through apps and websites. The platforms will also be required to provide a copy of the information to the sellers.
Sometimes these sellers do not fully understand their tax obligations, or they may work on multiple platforms and find it hard to keep track of their income. This will make it easier for UK gig workers who provide their services through digital platforms to complete their returns and get their tax right. To be clear, there will be no change in the amount of tax due. The information will simply help taxpayers to declare the correct amount of income first time. However, where sellers are not declaring all of their income from platforms, the information reported to HMRC will help to support the Government’s efforts to detect and tackle tax evasion.
HMRC will also be able to exchange information with other countries that sign up to the OECD rules. This exchange of information will allow HMRC to access data on UK sellers from platforms based outside the UK much more quickly and efficiently than is currently possible. The benefit is not, it is important to say, only for gig workers and tax authorities. The Government have heard directly from some of the major digital platforms that they welcome this international approach as it provides them with a set of standardised rules to follow. The UK is committed to its role as a global leader on tax transparency. In line with this ambition, the UK is one of the first major economies to announce that it will consult on the implementation of the OECD rules.
The clause introduces a power to make regulations to implement the OECD model rules for reporting by platform operators. These rules will require certain UK digital platforms to report information about the income of sellers of services on their platform. The power also allows regulations to be made to implement other, similar international agreements or arrangements. The clause allows for greater oversight of gig economy digital platforms, which in turn allows for more effective action to enforce tax compliance. So it is a positive change, which we support.
The OECD issued a report in July 2020 setting out new rules to oblige shared and gig economy platforms to report the activity of their users. As we have heard, the UK was involved in discussing and agreeing the model rules at the OECD. The reported information can be shared by other participating tax authorities using a new tax information exchange framework, simplifying compliance for taxpayers and making data easier to interpret and exchange. It is designed to help sellers on these platforms comply with tax obligations and to help HMRC detect and tackle tax evasion when they do not.
These new measures will have a significant combined impact on an estimated 2 to 5 million businesses that provide their services via digital platforms, though we acknowledge that the impact to each seller may be small. Although we welcome these changes, I invite the Minister to use his remarks to set out what support the Government will provide for digital platforms and the businesses providing services on them, to ensure that they are well prepared for new tasks that they have not had to undertake before.
Let me say a couple of things about the impact mentioned by the hon. Gentleman. It is important to say that the Government very much recognise that businesses will need time to get to grips with new reporting requirements and the rules, therefore, are not intended to come into force earlier than January 2023, with reporting due no earlier than January 2024. There will be a consultation on the implementation of the rules in 2021.
The goal is to set a framework and a regime that can stand effectively and flexibly over time, but with a degree of care about how it is consulted on and developed, with good notice for those who are affected to be able to change some of their practices if they need to.
The question arises: will there be a substantial amount of additional administrative burden? The answer is no. Having been in discussion with different parties involved, we think it will be easier for platforms to report information using agreed international standards. That is why the measure has been welcomed by some of the platforms.
Where there are costs, we will seek to minimise them where possible. For example, I expect there will be an optional exemption for start-ups and perhaps a phasing-in period for some of the obligations, to spread their initial impact. All those arrangements, therefore, should have the effect of creating a phased, calibrated and well structured introduction of the new measure.