The UK has become one of the first countries to implement new powers to ensure online sellers pay the correct level of tax. These powers were announced by the Chancellor in the 2017 Autumn Budget but came into force on 15th March 2018.
Online shopping has increased over the years and this has assisted a number of businesses and individuals to sell their products across the UK and access a wider market that they would have traditionally be able to reach. The impact of the new powers essentially now make online marketplaces accountable for VAT fraud committed by online sellers on their platforms.
The new power will identify those who are responsible for VAT fraud by selling on their online platform. The term is term-and –several liability (JSL). Sellers using marketplaces must provide the marketplace with details of their VAT number. Marketplaces will then have a responsibility to ensure the details provided and the VAT number is valid.
If sellers based in the UK or overseas are not paying the correct VAT when selling in the UK, and are not removed from the site following the issue of a notice by HMRC to the marketplace, HMRC will pursue the marketplaces themselves for any future unpaid tax by those sellers.
The focus and message to businesses in the UK and overseas is that online and high street businesses must all follow the same rules. These rules will develop HMRC’s operational response to online VAT fraud and the approach to any errors made by UK and overseas businesses.
Sellers using platforms such as eBay, amazon and other online marketplaces should also be aware that HMRC are beginning to focus on online sales as HMRC estimates that overseas traders selling goods online to UK customers are costing the exchequer £1-1.5 billion of VAT a year.
HMRC has already announced that it intends to combat the abuse by overseas traders by introducing a new Fulfilment House Due Diligence Scheme which will open to all businesses trading as a fulfilment business on 1st April 2018.
Currently many goods are misdeclared and undervalued as they are imported from outside the EU. This is followed by the onward sale of the goods to customers in the UK without the correct amount of VAT being paid.