UK to tackle e-commerce VAT fraud

31 March 2016

The UK government has announced that it will introduce new measures in order to prevent VAT evasion committed by non-compliant, non-EU businesses that sell goods online in the UK.

Currently there is a nil VAT registration threshold for these types of traders who should register for VAT from the first sale they make in the country, however in many cases this is not happening and as a result the goods are being sold without VAT being charged.  This is giving an unfair advantage to the non-resident traders as by not charging VAT they can sell the goods at a lower price compared to those sold by resident traders.

In an effort to level the playing field for all businesses HMRC plan to implement the following measures for non-resident businesses that are found to be non-compliant:

  • The obligation to appoint a UK-established VAT representative who will be jointly liable for the VAT owed by the company in the UK.
  • And/or provide a bank guarantee to HMRC ensuring the VAT owed on their sales will be settled.
  • The power for HMRC to contact and work with online marketplaces (such as e-bay, Amazon etc.) to ensure that their non-resident sellers are VAT compliant in the UK.  This could also involve holding the online marketplace jointly liable for any VAT owed on the sales transactions by their clients.
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