HMRC tackles online VAT evasion head-on

New world-leading laws have come into force in the UK, designed to ensure businesses selling goods and services online pay the correct level of VAT.

The online marketplaces that sellers use as a platform to sell their products are also now more accountable for VAT fraud committed by their sellers.

The new legislative powers, known as joint-and-several liability (JSL), make it the duty of online marketplaces – such as eBay and Amazon – who help those sell via their platforms to understand the UK’s tax rules clearly and avoid subsequent fines from HM Revenue & Customs (HMRC).

Last year, a report from Whitehall’s spending watchdog revealed up to £1.5 billion had been lost in unpaid VAT from online retailers based outside the European Union (EU) during the 2015-16 financial year.

This new legislation is the clearest statement of intent yet from the UK Government to ensure all businesses, whether they are based in the UK or abroad, or selling on the High Street or online, pay the tax they rightly owe.

For any sales made since 15th March 2018, online marketplaces are also liable for VAT if they are aware or should have been aware that overseas-based online sellers needed to be VAT-registered but were not. Marketplaces are now required to ensure online sellers display their valid VAT numbers on-site.

It is hoped this renewed focus on online VAT evasion will ensure consumers shop with genuine VAT-registered businesses with greater confidence.

Mel Stride, Financial Secretary to the Treasury, said: “While the honest majority pay what they owe, some businesses that sell goods online to UK shoppers are failing to pay the correct amount of VAT.

“This behaviour unfairly undercuts businesses trading in the UK that play by the rules, abuses the trust of buyers and deprives the government of significant revenue that funds vital public services.

“We are clear that everyone must pay their fair share of tax, and tackling tax evasion in all its forms is a top priority for the government.”

The UK was the first nation to implement powers to thwart VAT evasion by overseas sellers in September 2016. These initial measures have since banned more than 1,000 non-compliant overseas firms from selling goods online to UK consumers. More positively, it has encouraged tens of thousands of overseas sellers to register for VAT in the UK.

For further clarification on the UK’s new legislative powers on VAT, the Government has issued comprehensive guides to online marketplaces and online sellers alike.

If you’re just starting out as a business, your local TaxAssist Accountant can help you decide whether you need to be VAT-registered from the outset. Should it become necessary for your business to register for VAT, our team can deal with the paperwork for you.

For a free initial consultation on your VAT affairs, give our friendly and experienced team a call on 0800 0523 555 or drop us a line using our online enquiry form.

Date published 23 Mar 2018 | Last updated 23 Mar 2018