Update: UK to tackle e-commerce VAT fraud

30 September 2016

The UK government has now been given new powers 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 in the UK for these types of traders who should register for VAT from the first sale that they make, However in many cases this is not happening and as a result the goods are being sold without VAT being charged.

This is costing HMRC a large amount in unpaid VAT and is also 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 recoup these VAT amounts and also level the playing field for all businesses, HMRC have now been given new powers which they have the option to use when non-resident businesses are found to be non-compliant.  These powers include:

• 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.