Online marketplaces must take responsibility
HMRC have made it clear that it is up to online marketplaces to help those who sell through their platforms to understand the pertinent tax rules and avoid fines from HM Revenue & Customs (HMRC).
“They have the responsibility to make sure that fraud does not happen on their watch,” says their press release on the new rules, which strengthen HMRC’s powers to make online marketplaces accountable for VAT fraud committed by online sellers on their platforms.
The new ‘joint-and-several liability (JSL)’ rules for online marketplaces mean that if sellers aren’t paying the correct VAT when selling in the UK and are not removed from the site following the issue of an HMRC notice to the marketplace, then HMRC can pursue that marketplace for any future unpaid tax owing from those sellers.
Online marketplaces must now make sure sellers using their platforms display a valid VAT number on the site when they are given one. They’re also now liable for VAT where they knew or should have known that an overseas online seller should have been VAT-registered but was not.
HMRC hopes that its new powers will level the playing field and that both online and bricks-and-mortar are operating under the same rules and paying the tax they owe.
Financial secretary to the Treasury, Mel Stride, 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.”
The UK has been a world-leader in tackling this type of fraud. These new powers build on those introduced in September 2016 to tackle VAT evasion by overseas sellers, which have already forced over a thousand non-compliant overseas businesses to cease selling goods online in the UK and encouraged thousands more to register for VAT.
HMRC is also reminding businesses that they can apply to register for the Fulfilment House Due Diligence Scheme from 1 April 2018. This scheme will require businesses that store imported goods for or on behalf of non-EU overseas sellers to keep certain records and perform certain checks on the goods they are storing.
HMRC claims that this package of recent and forthcoming measures will help protect around £1 billion of tax revenue by 2023.
Do you sell online or operate an online selling platform? Always check with your accountant to ensure you’re abiding by the rules. The Government website has a useful guide for online marketplace operators and a guide for businesses that sell goods online in the UK.