Government cracks down on online overseas VAT evasion

  1. food

    RPower UKBF Regular Full Member - Verified Business

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    The government has promised to clamp down on online sellers evading VAT, to protect the UK market from unfair online competition.

    Over the years, UKBF members have expressed a concern at such practices, as noted in this particular thread.

    Members yesterday welcomed the news and debated the impact it would have.

    "The new provisions are twofold. Firstly HMRC will be able to insist that the sellers appont a UK VAT representative who will be jointly and severally liable for any debt. Second, where the sellers use UK fulfilment house then the fulfilment house can also be made jointly and severally liable.

    "There is a further consultation on imposing due diligence and money laundering oblications on the fulfilment houses. These provisions won't all be introduced this year, but that's true of many things announced in budgets," said one member, David Griffiths.

    The government said in a policy document yesterday that some overseas traders from beyond the EU “avoid paying UK VAT, undercutting online and high street retailers and abusing the trust of UK consumers who purchase goods via online marketplaces.”

    Under new Budget measures, HMRC will now be able to require non-compliant overseas traders to appoint a tax representative in the UK, and will be able to inform online marketplaces of the traders who have not complied.

    If traders continue to evade VAT and no action is taken to prevent the fraud, then online marketplaces can be made liable for the VAT.

    A due diligence scheme for fulfilment houses where overseas traders store their goods in the UK will also be set up to make it harder for the businesses to trade.

    “While the government continues to take action domestically, the global nature of the fraud means international action is also required. The UK has already raised this issue with EU and international partners and the EU and OECD’s current work programmes include further work to help combat this fraud,” the policy document read.

    The Treasury estimates this measure will recoup £875m in lost VAT receipts over the next four years. The total cost to the taxpayer of this abuse was officially estimated at up to £1.5bn a year.