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HM Revenue and Customs has received a ten-fold increase in VAT registration applications from internet retailers this year, following the introduction of new powers to hold online marketplaces liable for VAT unpaid by overseas retailers.
HMRC said the new powers, which came into force in September, aimed to address the unfair advantage overseas retailers had over UK-based retailers by not charging VAT on internet sales. HMRC said that this activity had cost the Treasury around GBP1bn (USD1.2bn) a year.
Under the rules, HMRC can force overseas retailers to appoint a UK-based VAT representative or provide a financial guarantee. If the overseas retailer fails to comply, the online marketplace they use to sell their goods could be held liable. Meanwhile, warehouses that distribute goods from overseas retailers need to join a due diligence scheme by 2018 or face penalties.
"Having worked in the retail sector, I know what an important time of year this is for retailers and the millions of workers across the country who work in the sector," said Jane Ellison, Financial Secretary to the Treasury. "These new powers will mean that everyone has to play by the same rules and pay the right tax."
The new rules are expected to raise GBP875m (USD1,082m) for the Treasury by 2021.
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