HM Revenue & Customs (HMRC) is to be given new powers to obtain details of millions of transactions from firms including Ebay, Paypal and hotel comparison websites in a bid to find people failing to declare their transactions as business activities.

Online sellers who use Ebay, holiday letting websites and other internet retailers will face one of the “biggest tax crackdowns in history” under plans by the Government to obtain details of millions of online transactions.

Under the proposals, the taxman will be able to access information from Paypal, which is owned by Ebay, smartphone app stores, holiday comparison websites and many other online retailers. This will uncover the thousands of people who let their homes or sell good on the internet but may not pay business tax.

The taxman will be able to use the powers to collect the names, addresses and revenues of any businesses, which use the websites and will then compare the information with tax returns filed by them and use it to pursue those who have failed to pay.

According to the consultation, the scale of the data collection is “huge” and amounts to a radical change in the way that HMRC conducts its business. However, there are concerns that the new powers could lead to “fishing expeditions”, which could see small businesses sent “frightening” letters demanding they pay taxes they do not owe. Some people have already been targeted for making profits of as little as £100.

There are also concerns about how the department will cope with the sheer amount of data involved, particularly since the taxman’s record at keeping private information secure has been patchy to say the least.

However, HMRC has insisted that it will only collect data about businesses that use the internet to sell goods and services rather than those who are buying it.

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