New rules that will help to curb the amount of businesses selling online but not paying VAT have recently come into force.

Online sellers operating through marketplaces are frequently managing to dodge VAT. This means they are able to undercut high street shops who are having to add VAT onto their prices. This can risk putting them out of business because they can’t compete on price.

Mel Stride, financial secretary to the Treasury said that targeting tax evasion was a priority for the government. “We are clear that everyone must pay their fair share of tax,” she said.

“Some businesses that sell good online to UKM 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,” she added.

New rulesHMRC goes after online tax dodgers

The new rules were first announced by the chancellor in last year’s Autumn Budget speech.

They aim to build on the UK’s current laws on VAT to ensure that fewer people can get away with not paying their fair share of tax.

The new rules mean that online marketplaces such as eBay or Amazon will be liable for VAT if they knew or should have known that an online seller using their website should be VAT registered but wasn’t.

If a company does not pay the right amount of VAT on UK sales, then HMRC will send a notice to the online marketplace hosting them to remove them from the site. If they don’t remove them, then HMRC will pursue the marketplaces themselves.

Current success

Since September, HMRC’s powers to stop overseas sellers from evading VAT have helped to prevent more than 1000 non-compliant foreign businesses from selling in the UK. This has also helped to motivate other businesses to register for VAT who wish to avoid being shut down by HMRC.

The government has offered guidance on VAT both for online marketplaces and for companies who sell goods in the UK via those marketplaces.

 

What do you think of HMRC’s attempts to stop VAT evasion so far? Has it spurred you into action to become VAT registered? Please let us know your thoughts.