August 22nd, 2011

UK Paypal still deny *that* affair with HMRC, but let your details slip anyway

By Sam Thewlis

You probably remember us reporting on HMRC claiming they could magically tie up people's eBay usernames with their self assessment record a little while ago. We ponitifcated on the matter, as did you, and some suggested that it might be eBay-owned Paypal who was sharing the pillow talk with HMRC.

Now, new reports that Paypal in the US are sharing information with the IRS seemed to add further weight to speculations of a sordid little affair here in the UK.

In the US, owing to new IRS rules, PayPal has started asking users to provide a tax ID number, which is either a Social Security number, Individual Tax Identification Number or an Employer Identification Number. PayPal (US) will use this tax ID number to send tax Form 1099-K to you and the IRS when the payments you receive exceed both of these milestones in a calendar year:

> $20,000 in gross payment volume for goods and services
> 200 payments

Clearly most 'normal', non-trading PayPal users, will not breach theses limits, so Paypal will not need to report them to the IRS. But they'll still need to enter their tax ID just in case. Hmmm.

So we asked Paypal UK about this. At first they were baffled, knowing nothing of the US, but when pressed we were given the following responses:

Paypal takes data protection seriously and would never volunteer account information, but they do work with law enforcement and will provide any information requested by law. They also confirmed that there are no plans to request self-assessment of other tax reference numbers from UK Paypal users.

So that's good, right? Paypal only gives HMRC information when required to do so by law. Nothing shady going on here.

Er. Almost.

You see, back in 2008, some new rules were introduced in the Finance Act 2008, specifically Schedule 36. And Schedule 36 FA 2008 gives HMRC some fairly hefty powers to request information. The law states: ...

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