New UK VAT laws apply to online marketplace traders
Ryan Bevan 22 September 2016 No comments
New HMRC powers to tackle VAT non-compliant overseas businesses trading via online marketplaces
A strengthening of HMRC’s powers to tackle non-compliant overseas businesses selling goods to UK consumers via online marketplaces came into effect last week, following Royal Assent of Finance Bill 2016.
Overseas businesses selling goods located in the UK via online marketplaces to UK consumer customers are required to be VAT registered and account for UK VAT – the UK VAT registration threshold does not apply to non-established businesses. It has been estimated that between £1-1.5 billion of VAT revenue was lost in 2015-2016 as a result of such traders failing to comply with the rules.
Under the new provisions HMRC can now register the overseas seller for VAT, direct them to appoint a UK VAT representative, and require the provision of suitable security. More controversially HMRC could also hold the online marketplace joint and severally liable for any VAT owing if the trader still does not comply. Under these circumstances there would typically be an initial pre-notification period during which HMRC would try to work with the online marketplace to resolve the matter.
However, this could be followed by HMRC issuing a formal joint and several liability notice. The liability notice will apply until it is withdrawn by HMRC. The online marketplace will not be assessed for any VAT provided the offending online seller is removed from the marketplace within the time period specified in the liability notice.
If you are an overseas online seller who thinks these new provisions could affect you, or an online marketplace concerned about the impact of additional compliance burdens, get in touch to see how we can help you.
HMRC guidance with further details of the new rules can be found here.