OnlyFans, a UK-based content subscription service popular with amateur pornographic models, is fighting a tax bill of more than £10m, according to court documents.
As revealed by Sky News back in July, the service’s parent company Fenix International Ltd is facing an unpaid VAT bill from Her Majesty’s Revenue and Customs (HMRC) covering almost four years’ worth of uncollected taxes.
Court documents published today reveal the company could be obliged to pay £11,236,478 following a tax tribunal decision, which was this Tuesday extended so that Judge Anne Scott could ask the European Court of Justice to clarify a crucial legal detail.
OnlyFans, which has spiked in popularity during the coronavirus lockdown, functions like a social media platform where fans pay a monthly subscription fee to access content creators’ protected posts.
Although the company’s promotional material largely features lifestyle influencers, the majority of its content is pornographic. In a profile of its founder Ben Stokely, Bloomberg News reported it had more than a million content creators and 85 million users, generating upwards of $2bn this year.
The scale of the company’s growth during the pandemic is indicated by HMRC’s tax assessment requesting £3,015,912 for the period from January to April of this year – more than 26% of its lifetime revenue in the last four months of operations.
This July, for the first time since it began operating in 2016, the service started charging VAT on fans’ monthly subscriptions, following discussions with HMRC – and to the surprise of content creators, several of whom had expressed concerns to Sky News about paying double tax.
At the time, the company claimed that the change was “due to a recent interpretation of an EU law by HMRC”, although it did not respond to a request for clarification on what this recent interpretation was.
Experts contacted by Sky News were not aware of any recent changes to how HMRC interprets EU law regarding applying VAT to electronically supplied services.
A spokesperson for HMRC confirmed to Sky News that there have been “no recent changes to the VAT rules relating to electronically supplied services and digital platforms”, adding: “Current UK VAT rules correctly reflect EU VAT legislation.”
Following our report in July, Fenix International filed revised accounts with Companies House restating its earnings and tax liabilities, increasing its VAT liability by £1.6m in 2018.
HMRC could issue the business with a penalty doubling the amount of tax owed if it assesses OnlyFans was careless or deliberately inaccurate with its returns.
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