Toby Ryland, corporate tax partner at the chartered accountants HW Fisher & Company, commented: “The days of businesses masquerading as individuals to avoid tax when selling goods on online platforms like ebay are numbered.
“The government has long identified this problem as a serious drain on its VAT revenues, and the Chancellor now plans to tighten the screw further.
“While this is still just a consultation, it opens the door for the government to force online platforms to deduct VAT from sales, and then oblige sellers to prove they are eligible to claim it back.
“However such an approach would be a hammer to crack a nut, and is likely to raise lots of tricky questions about whether the platforms will have to deduct VAT from all sales, or just those made by sellers they think are businesses.
“Clearly the imposition of such a bureaucratic burden will make life difficult for frequent ebay sellers who do it as a source of extra income rather than a business.
“But the greater hurdle for the government will be the reaction of the internet platforms themselves, who will respond to the threat of extra red tape with the full force of their legal and lobbying firepower.
“With the government’s tax relationship with the tech titans already strained, this consultation risks muddying the waters further.”