What is DAC7?

DAC7 might sound like something from a sci-fi movie, but it’s a real-world rule that digital platforms and sellers need to know about.

If you run a platform or make money through one, you need to follow additional reporting rules and share the correct information with HMRC.

So, what’s it all about? Let’s break it down.👇

What actually is DAC7?

DAC7, short for “Directive on Administrative Cooperation 7,” is a piece of EU legislation that requires digital platforms to report their sellers’ income to HMRC. It’s also known as reporting rules for digital Platforms. ✍️

Put simply, if you run a platform where people sell goods, services or rent things out, you now have to collect certain information about your sellers and share it with the taxman. 

Why was DAC7 introduced?

The digital economy has boomed over the last few years. From drop-shipping and digital downloads to tutoring via Zoom or renting out garden offices, people are finding more ways than ever to earn online.

To keep up, DAC7 was introduced, helping HMRC to ensure that all income earned online is properly reported, without a penny slipping through the cracks. 💸

Enter DAC7:

• It helps close the tax gap (the money governments miss out on).
• It puts online sellers and traditional businesses on an equal footing.
• It gives HMRC a clearer view of who’s earning what.

Who does DAC7 apply to?

The list is pretty broad and covers almost any platform where users can earn money:

• Online marketplaces (selling goods, booking services, renting properties).
• Apps for car-sharing, freelance jobs, holiday lets and more. 🚗
• Non-EU platforms (like UK companies!) that have EU-based users. 

Under DAC7 UK guidance, if your platform connects sellers to customers and you have EU users, it applies to you. 

What information do platforms need to report?

It’s more than just names and numbers. Here’s what platforms must collect and send off:

All of this helps HMRC get a clear picture of each seller’s activity over the year and ensure everything adds up. It’s all part of staying on top of your tax compliance! 

When is DAC7 reporting required?

Platforms need to file their DAC7 reports by the end of January each year, covering activity from the previous calendar year. For example, the report for 2024 needed to be submitted by 31st January 2025. 📅

It’s a fixed annual deadline, so it’s worth getting into the habit of preparing everything in good time.  

What happens if I don’t report the correct information to marketplaces? 

Many platforms have their own rules if sellers don’t provide the right information, and things can get a bit awkward if you don’t. Here’s what might happen:

• Platforms could temporarily suspend your account while they wait for your details. 🚫
• They might put your payments on hold until you resolve everything. 
• In some cases, they may need to flag you as non-compliant to HMRC. 😬

But don’t panic! DAC7 isn’t about catching anyone out. It’s just about making sure platforms have what they need to meet their legal obligations.

So, if a platform asks you to confirm a few details, it’s worth taking five minutes to do it.

What happens if a platform doesn’t comply?

Like sellers, platforms have responsibilities under DAC7, mainly around collecting and reporting the correct information.

If that doesn’t happen, there may be consequences, such as:

• A reminder (or, in some cases, a fine). 
• Potential restrictions when operating in certain EU countries. 
• Being flagged as not fully compliant could create some extra admin work.

That said, as long as the reporting is done correctly and on time, there’s nothing to worry about. It’s just about keeping things running smoothly and staying within the rules. 

How does DAC7 impact sellers?

If you’re a seller using online platforms, here’s what DAC7 means for you:

If you’re already reporting your income correctly, there’s nothing to worry about. DAC7 isn’t about introducing new taxes; it’s just an extra layer of admin behind the scenes. So no need to lose sleep over it.

Keeping on top of DAC7

DAC7 is all about improving transparency, not about taxing you into oblivion. It’s a reporting requirement for platforms, not a new tax for sellers. But it’s still a good idea to stay on top of your income and paperwork, because HMRC will now have the full picture.