Online Sellers Need To Pay Full Tax As New Laws Come Into Effect

These new laws were announced by Chancellor Philip Hammond during last year’s Autumn Budget aiming to level the playing field so high street and online retailers are not disadvantaged.

It is the responsibility of the online marketplaces to make sure sellers on their platform pay the right tax and to make sure fraud doesn’t happen.

If sellers based in UK or overseas are not paying the correct VAT when selling in UK, and if not removed from the site following the issue of a notice by HRMC, then it has the power to pursue the marketplaces themselves.

This may lead to fines and recovery of future unpaid tax by those sellers.

The rules also make online marketplaces liable for VAT. If they knew or should have known that an overseas online seller should have been VAT registered but was not.

The HRMC said there is “a clear message” sent to all retailers and other businesses in UK and overseas, online and on the high street “must all play by the same rules”.

Online marketplaces also make sure sellers using their platforms display a valid VAT number on the site when they are given one. Help buyers make an informed choice about buying goods from a VAT-registered business.

Marketplaces are encouraged in helping online sellers to understand the tax rules.

Businesses can apply to register for the Fulfilment House Due Diligence Scheme from April 1.

The scheme will require businesses that store imported goods for or on behalf of overseas sellers from outside the EU. They need to maintain records and perform checks on the goods they are storing.

“Whilst the honest majority pay what they owe, some businesses that sell goods online to UK shoppers are failing to pay the correct amount of VAT,” Treasury financial secretary Mel Stride said.

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 funds.

It is clear that everyone must pay tax and tackling tax evasion in all its forms is top priority for the government.

UK is the first country to introduce tough powers to tackle VAT evasion by overseas sellers in September 2016, which led to removal of over thousand non-complaint overseas businesses from selling goods online in UK and to motivate thousands of others to register for VAT.

The new rules further strengthen and develop HRMC’s operational response to online VAT fraud and error from both UK and overseas businesses.

The new measures will help protect around £1 billion of tax revenue by 2023 believed by HRMC.