It has recently been reported in the press that MPs on the Public Accounts Committee (PAC) have criticised HMRC for being ‘too cautious’ in pursuing tax lost because third party sellers on Amazon and eBay are not charging VAT on sales they make in the UK. It is estimated that the tax lost is around £1.5bn.
The tax loss arises because firms based outside the UK and selling goods via online marketplaces keep some stock in UK warehouses in order to provide next day delivery. Since the goods are dispatched in the UK the sellers should be registered for UK VAT, but many do not do so.
HMRC has already introduced rules to hold online marketplaces jointly liable for lost VAT. However, the PAC’s report concludes that further action is required and it is likely that HMRC will introduce further measures.
It is therefore important that all overseas businesses supplying goods from UK warehouses take action to comply with UK VAT law as soon as possible. There is no VAT registration threshold for overseas businesses and making any supplies in the UK will give rise to the need to register for UK VAT. CVC is able to assist overseas businesses meeting their UK VAT obligations and can assist in the VAT registration process.
It should be noted that where businesses have been making sales in the UK but have not VAT registered HMRC will be able to seek back payment of VAT due on these sales and it may be very difficult to recover this VAT from customers.
*Budget Update* HMRC announced anti-avoidance measures in this are in the Autumn 2017 Budget more details can be viewed here