HMRC Cracking Down on Online Marketplace Sellers

Are you an online marketplace seller who has received a letter from HMRC? You’re not alone. HMRC is increasing its scrutiny of income generated through online platforms (Amazon, eBay, Etsy, Argos, and ASOS) and has recently launched a campaign targeting individuals they suspect have been operating in the hidden economy by not declaring their earnings. We break down what’s happening and explain how our specialist tax dispute legal team can help online marketplace owners like you navigate this complex situation.

HMRC’s Increased Focus on Online Marketplace Income

In late 2024, the government estimated the tax gap to be a significant £39.8 billion. To reduce this gap, HMRC announced a substantial investment to recruit thousands of additional compliance officers. As a result, HMRC compliance activity is anticipated to be higher in 2025 and beyond.

One of the key strategies HMRC is employing is the use of ‘one to many’ campaigns’ (OTM). These are not formal compliance checks initially, but rather serve to inform taxpayers that HMRC has information regarding their income and to prompt them to review their tax affairs. Recently, HMRC has started sending OTM letters to individuals whose data from online marketplaces suggests they have earned income that may not have been fully declared to HMRC.

Why is HMRC Targeting Online Marketplace Sellers?

New rules that came into force in January 2024 require digital platforms to report data about the income earned by their users to HMRC. The first reports were delivered to HMRC by 31 January 2025. This gives HMRC unprecedented access to information about individuals selling goods, providing services, renting out property, or creating online content through these platforms.

The recent HMRC letters indicate that they already have information showing income from online marketplace sales up to the tax year ending 5 April 2023. They are now urging recipients to declare this income as they may owe tax.

What Happens If You Receive an HMRC ‘Nudge’ Letter?

If you’ve received a letter titled “Please tell us about income you’ve earned from online marketplace sales,” it’s crucial to take it seriously and not ignore it. The letter states that HMRC has information indicating you’ve earned income and that you may owe tax. It prompts you to either declare any underpaid tax or contact HMRC within 30 days. Failure to respond may lead to HMRC opening a formal compliance check, potentially resulting in penalties.

HMRC considers you likely to be trading if you buy or make goods to sell at a profit, which means this income may be taxable. While selling personal items from your home is usually not taxable, selling personal possessions worth over £6,000 may be subject to Capital Gains Tax.

How to Respond to an HMRC Letter About Online Marketplace Sales

If HMRC has reached out about your online sales, it’s a sign they’re already aware of some activity. Ignoring the letter isn’t an option — timely action can make all the difference.

The letter typically includes a reference number and points you toward official channels, but navigating the process can feel overwhelming. There are deadlines to meet, specific forms to complete, and the way you present your situation could impact the penalties and interest you face.

What many people don’t realise is that once HMRC contacts you, any disclosure made might be considered ‘prompted,’ which can influence the outcome. And because interest on unpaid tax accrues daily, every delay can add to the amount owed.

The key is to approach this carefully, understanding not just what needs to be done — but how to do it strategically. With the right guidance, it’s possible to manage the situation effectively and minimise potential liabilities.

Wondering what your next step should be? It might be worth exploring how a tailored approach could help you resolve things with HMRC on the best possible terms.

How Our Tax Dispute Solicitors Can Help Online Marketplace Owners

Navigating an HMRC compliance check or needing to make a voluntary disclosure can be a stressful and complex process. Our specialist tax dispute solicitors have extensive experience in assisting individuals and businesses with HMRC compliance checks and tax investigations. If you’ve received a letter from HMRC regarding your online marketplace sales, we can provide invaluable support by:

• Communicating with HMRC on your behalf: We can act as your point of contact, ensuring all correspondence is handled professionally and effectively, protecting you from potential pitfalls.
• Negotiating with HMRC: We can leverage our expertise to negotiate the best possible outcome, including potential reductions in penalties and exploring Time to Pay arrangements if you have outstanding tax liabilities.
• Instructing accountants on your behalf: We can recommend and work closely with ICAEW chartered accountants to ensure your tax affairs are accurately reviewed and reported.
• Making a voluntary disclosure on your behalf: We can guide you through the voluntary disclosure process, ensuring all necessary information is accurately presented to HMRC, potentially mitigating penalties and avoiding more serious consequences.
• Challenging incorrect HMRC assessments: If you believe HMRC’s assessment is incorrect, we can help you understand your appeal rights and represent you in any tax appeals.

Don’t face HMRC scrutiny alone. Contact our experienced tax dispute resolution team today for a confidential discussion and expert legal guidance. We are here to help online marketplace owners understand their obligations, respond effectively to HMRC, and ensure their tax affairs are in order.