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UK Updates VAT Guidance For Online Marketplaces

by Jason Gorringe,, London

19 March 2018

HM Revenue and Customs (HMRC) has updated its value-added tax guidance for online marketplaces and for suppliers using them to sell to UK consumers.

The update follows new rules introduced in the Autumn 2017 Budget.

Earlier, new value-added tax rules were introduced from 2016 to hold online marketplaces liable for VAT unpaid by overseas retailers. The powers, which came into force in September 2016, were aimed at addressing the unfair advantage overseas retailers had over UK-based retailers by not charging VAT on internet sales. HMRC estimated the cost to the Treasury to be around GBP1bn (USD1.25bn) a year, with many of the non-compliant overseas retailers said to be based in China.

Under those 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.

In 2016, HMRC saw a ten-fold increase in VAT registration applications from internet retailers as a result of the change.

Then, in the 2017 Autumn Budget, the UK decided to bolster the new regime by introducing joint and several liability for online marketplaces and introducing a new obligation requiring sellers to display their VAT numbers online.

Subsequently, the UK has also recently proposed the introduction of a split payment model to tackle value-added tax non-compliance by foreign online firms. Under the plans, VAT would be extracted from the price paid by consumers in real time, using card payment technology, and then the revenue would be deposited with HMRC.

TAGS: compliance | VAT tax authority guidance | tax | business | value added tax (VAT) | VAT cross-border transactions | China | United Kingdom | tax authority | internet | HM Revenue and Customs (HMRC) | penalties | retail | HM Revenue and Customs (HMRC) | services | VAT goods & services classification | VAT compliance matters

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