HM Revenue & Customs (HMRC) has been granted new powers to help combat fraud conducted via digital marketplaces and tackle online sellers who fail to pay the correct amount of tax.
Originally announced in the Autumn Budget 2017, the new legislation means HMRC can hold operators of online marketplaces, such as Amazon and eBay, ‘jointly and severally liable’ for the unpaid VAT of sellers operating via the platform.
The new rules are intended to create a fairer playing field between businesses that adhere to tax laws and those that flout them, as well as to reinforce the Government’s plight to tackle tax evasion across the board.
In its announcement, HMRC said: “Online marketplaces can help those who sell through their platforms to understand the tax rules and therefore avoid fines from HM Revenue & Customs.”
“And, indeed, they have the responsibility to make sure that fraud does not happen on their watch.”
“This sends a clear message that business in the UK and overseas, online and on the high-street, must all play by the same rules, protecting traditional high street and legitimate online sellers who pay what they owe.”
Under the JSL powers, sellers based either in the UK or overseas who are not paying the correct VAT, when completing sales in the UK, must be removed by the marketplace once HMRC issues a notice to them.
If sellers, whether UK-based or overseas, are not subsequently removed from the site following notice from HMRC then the marketplace in question will be pursued for any future unpaid tax.
The new rules which came into force in March, also make marketplaces liable for VAT where they knew, or should have known, that an overseas online seller should have been VAT-registered but was not.
To help enforce the rules, online marketplaces also have a legal obligation to ensure all sellers display a valid VAT number on the website, promoting greater transparency for consumers.
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.”
“We are clear that everyone must pay their fair share of tax, and tackling tax evasion in all its form is a top priority for the government.”
Businesses operating in this sector are also being encouraged to register for the Fulfilment House Due Diligence Scheme, which began on the 1 April 2018.
This scheme requires businesses that store imported good for or on behalf of overseas sellers from outside the EU to keep records and perform checks on the goods they are storing.
It has been estimated that these measures will help to protect around £1 billion of tax revenue by 2023.
Here at George Hay, we work with many retailers who have a significant online presence, several of which regularly sell through platforms such as eBay and Amazon. If you sell online or operate an online selling platform you should seek professional advice to ensure you’re abiding by the rules.
For professional advice on this and other tax-related matters, please contact us today.