If you run a small business and sell online, you need to be sure you’re paying the right amount of tax. HMRC is more determined than ever to make sure you are – and to make sure the online marketplaces you sell through become their right hand, taking responsibility for your tax compliance.

Getting Tough on Online Tax EvasionOnline Marketplace Tax

HMRC estimates that in the tax year 2016-17, the tax loss from VAT fraud and error on online marketplaces was between £1 billion and £1.5 billion.

This week, it announced that it will be asking all online marketplaces operating in the UK to sign an agreement to help tackle online VAT fraud and errors on their platforms.

This agreement builds on the joint and several liability (JSL) rules that hold online marketplaces accountable for VAT fraud committed by sellers on their platforms.

These rules, introduced in September 2016 and strengthened in March 2018, are already proving effecting in tackling online VAT fraud and error.

Between the introduction of the JSL rules and January 2018, HMRC opened around 2,100 investigations into non-compliant overseas businesses selling via online marketplaces, resulting in the issue of around 1,300 JSL notices to online marketplaces.

They also received approximately 27,550 applications to register for VAT from overseas online retail businesses in that period, compared to just 1,650 in 2015.

Mel Stride, the financial secretary to the Treasury, said: “The growth of online marketplaces has helped many businesses to sell more products across the UK and has contributed greatly to the economy.

“However, there is a small minority of sellers not paying their fair share of tax, and we’re committed to working with marketplaces on multiple levels to tackle tax evasion.”

Online Marketplace Agreement

The agreement asks online marketplaces to commit to:

  • educating online sellers from the UK and abroad about their VAT obligations in the UK either via their own help and support or by directing them to HMRC’s guidance
  • responding swiftly when notified by HMRC that sellers are not playing by the VAT rules and taking appropriate action
  • finding a suitable and lawful way to respond to HMRC enquiries about their sellers

HMRC says it will publish a list of all online marketplace signatories and remove any that fail to meet the commitments.

Jon Thompson, HMRC’s chief executive, said:

“The UK has already led the way in holding online marketplaces accountable for VAT fraud committed on their platforms.

“The agreement goes even further to tackle this issue, with online marketplaces committing to helping their sellers understand their tax responsibilities and ensuring we have the information we need to take action against those who do not play by the rules.”

Are you an online seller? Find out more about your responsibilities by visiting the Government’s Online and Distance Selling guidance and its VAT guidance for businesses that sell goods in the UK using online marketplaces.