In January 2023 HMRC launched a one-to-many (OTM) letter campaign aimed at people who earn money from online marketplace sales, and people who earn money from content creation on digital platforms, in an attempt to help these people understand and meet their tax paying obligations under the UK tax system. Here we explain the approach being used by HMRC, and what to do if you either earn money from one of these sources, or if you receive a letter.
What is the one-to-many (OTM) approach?
HMRC describes the OTM system as “the process of issuing a common message designed to positively influence customer actions”. In short, this means that they contact many people in relation to one specific issue in order to encourage people to get their tax affairs in order, and then to get it right going forward. These letters (also referred to as “nudge” letters) are an effective way for HMRC to contact many people whilst using the least amount of resource. Most of the time these communications will arrive in the post, but they have been known to use more digital forms of communication in recent years such as emails, SMS texting, and messages in your personal tax account.
What areas are they currently investigating and why?
The online marketspace has developed substantially in recent years, with many people managing to earn considerable amounts without having to leave their homes. Since the market is so volatile a person can go from earning nothing to thousands of pounds overnight, which can make it very hard to keep on top of, especially when it comes to understanding where you stand when it comes to the UK tax system. HMRC have recognised this and are using their latest OTM letter campaign to target people who are earning money in these sectors to come forward and correct declare their income:
- People who earn money from online marketplace sales
- People who earn money from creating content on digital platforms
If you earn money from either of these sources and don’t currently declare that to HMRC, then you may very well receive a letter from them soon.
What letters are HMRC sending?
HMRC are sending out two letters in relation to these OTM campaigns as follows:
- Status check letter – this will be sent to people who have been identified as having income from online marketplace sales.
- Digital content earnings letter – this will be sent to people who have been identified as having income from content creation on digital platforms.
The status check letter states that they have identified you as a person who receives income from online marketplace sales, and it asks you to complete and return to them a “Certificate of Tax Position”. The certificate asks you to declare whether you believe that your tax affairs are all up to date, or whether you intend to use the digital disclosure service to bring your tax affairs up to date. You must complete and return this to HMRC within 30 days of the date of the letter.
The digital content earnings letter is almost exactly the same as the status check letter whereby HMRC requires you to complete and return a “Certificate of Tax Position” to them within 30 days of the letter to confirm whether you believe that your tax affairs are all in order or whether you will be making a digital disclosure to them of your undeclared income.
What to do if you earn money from online marketplace sales or digital content creation
If you currently earn income from online marketplaces sales or digital content creation then we would recommend you reading the HMRC guidance at https://www.gov.uk/government/publications/selling-online-and-paying-taxes/selling-online-and-paying-taxes-information-sheet
If you earn more than £1,000 in sales before deducting expenses then you will need to pay income tax on this income. You can declare this income to HMRC and pay the appropriate tax through the self-assessment system.
Further information
If you are in need of any further information or any advice specific to your circumstances then please don’t hesitate to get in touch with us on [email protected] or 01634 540340.
