Tax & admin · 16 March 2018

HMRC gives itself new powers to tackle online VAT fraud

Online VAT fraud
Overseas online sellers have been caught selling to UK consumers without paying VAT

New measures introduced today by HMRC will make digital marketplaces more accountable to online VAT fraud committed by overseas sellers and help the tax office recoup up to £1.5bn in lost revenue.

HMRC has claimed its “world-leading powers”, initially announced by chancellor Phillip Hammond in his recent Spring Statement, will level the playing field between law-abiding high street and online businesses and marketplace sellers evading VAT responsibilities.

Online VAT fraud facts

• Overseas traders selling goods to UK consumers online without VAT
• Undercuts UK sellers by up to 20 per cent
• Cost HMRC between £1bn – £1.5bn in 2016

A parliamentary investigation in October 2017 found that small UK business owners were being “severely undercut” by overseas competitors selling goods without VAT. MPs claimed HMRC’s response to online VAT fraud had been “dismal”, and also decided platforms such as eBay and Amazon had not taken the issue seriously enough.

Now, changes to the law will allow HMRC to use “joint-and-several liability” (JSL) to make such marketplaces directly accountable to VAT fraud committed on its platform.

If sellers based in the UK or overseas fail to pay the correct VAT when selling to British consumers, and are not removed from the site following issue of a notice by HMRC to the marketplace, HMRC will seek future unpaid tax from the platforms themselves.

From any sales made from today (Friday 16 March), marketplaces will be liable for VAT where they “knew or should have known” an overseas seller should have been VAT-registered, but was not.

Online marketplaces also have a legal obligation to ensure all sellers display a valid VAT number on the website, giving consumers greater visibility of tax practices.

Take a look at more HMRC content:

Commenting on the measures, Mel Stride, financial secretary to the Treasury, said: “Whilst 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.”

Online VAT fraud can be reported anonymously to HMRC here

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ABOUT THE EXPERT

Simon Caldwell is deputy editor at Business Advice. He has a BA in politics and communications from the University of Liverpool, and has previously worked as a content editor in local government and the ecommerce industry.

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