George Osborne included measures to tackle VAT fraud by overseas sellers on marketplaces such as eBay and Amazon in the 8th Budget he delivered as Chancellor of the Exchequer this afternoon.
What’s in the Budget?
Here is the section on the Gov.uk Website verbatim. You can find it here in section 4.28.
“Tackling VAT evasion by overseas sellers
The government is taking firm action to protect the UK market from unfair online competition. Some overseas traders from beyond the EU avoid paying UK VAT, undercutting online and high street retailers and abusing the trust of UK consumers who purchase goods via online marketplaces.
Budget 2016 announces action that will help to protect consumers and level the playing field for businesses. HMRC will be able to require non-compliant overseas traders to appoint a tax representative in the UK, and will be able to inform online marketplaces of the traders who have not complied. If traders continue to evade VAT and no action is taken to prevent the fraud, then online marketplaces can be made liable for the VAT.
The government will also introduce a due diligence scheme for the fulfilment houses where overseas traders store their goods in the UK. This will make it harder for VAT evading firms to trade. While the government continues to take action domestically, the global nature of the fraud means international action is also required. The UK has already raised this issue with EU and international partners and the EU and OECD’s current work programmes include further work to help combat this fraud.”
So, it seems like a step in the right direction. Obviously it depends on how HMRC exercises their new powers and then how the marketplaces respond. But the threat is there if the marketplaces don’t do their best to kick off non-complaint sellers that they can be held liable for the VAT. But my guess is that things won’t get that far.
eBay’s comment
eBay has commented on the Budget this afternoon: “eBay has always been committed to making our platform a fair place to buy and sell. We expect all our sellers to comply fully with their legal obligations including VAT. We welcome rules that ensure a fair marketplace and will review the detail of the legislation. Even without such a law, we would not hesitate to suspend sellers found by HMRC to be evading VAT. We are already working closely with HMRC on this issue and will continue to assist their efforts. We already continuously remind all our users of their need to comply with their legal obligations and take proactive steps around the world to ensure our sellers comply with the law. For example, we have established a dedicated information centre on our site for Chinese sellers to assist them in understanding their tax obligations. We have also contacted hundreds of Chinese sellers to notify and educate them on the need to comply with the law.”
The small print
And here’s detail on how it will actually work, taken from this page:
“How will they work?
These new measures will not apply automatically to all overseas businesses and/or online marketplaces. These are discretionary powers that will enable HMRC to target the most non-compliant overseas businesses and take the most appropriate action on a case by case basis. HMRC will use risk assessment tools to first identify those overseas businesses that are high risk and/or continue to be non-compliant with UK VAT rules.
HMRC will then attempt to gain compliance directly with the overseas business by making contact with them.
Where appropriate HMRC will then consider whether to:
– compulsorily register the overseas business for VAT in the UK
– direct the appointment of a UK-established VAT representative
– require an appropriate form of security
Where the overseas business does not comply with HMRC’s directions and/or continues to be non-compliant, HMRC will contact the relevant online marketplace through which the overseas business is trading. It will put the online marketplace on notice that it may be held jointly and severally liable for the VAT in respect of the overseas businesses future taxable sales through that online marketplace. The notice will also set out a period of time (normally 30 days) during which the online marketplace can avoid being held jointly and severally liable either by securing compliance from the overseas business or removing it from its online marketplace. After this period of time, the online marketplace will be held jointly and severally liable if no such action has been taken.”
27 Responses
Here are the guidelines
VAT Overseas businesses and joint and several liability for online marketplaces
https://www.gov.uk/government/publications/vat-overseas-businesses-and-joint-and-several-liability-for-online-marketplaces/vat-overseas-businesses-and-joint-and-several-liability-for-online-marketplaces
An extract
“HMRC will then attempt to gain compliance directly with the overseas business by making contact with them.
Where appropriate HMRC will then consider whether to:
compulsorily register the overseas business for VAT in the UK
direct the appointment of a UK-established VAT representative
require an appropriate form of security
Where the overseas business does not comply with HMRC’s directions and/or continues to be non-compliant, HMRC will contact the relevant online marketplace through which the overseas business is trading. It will put the online marketplace on notice that it may be held jointly and severally liable for the VAT in respect of the overseas businesses future taxable sales through that online marketplace. The notice will also set out a period of time (normally 30 days) during which the online marketplace can avoid being held jointly and severally liable either by securing compliance from the overseas business or removing it from its online marketplace. After this period of time, the online marketplace will be held jointly and severally liable if no such action has been taken.”
#FeelingHopeful
A small step in the right direction, though I don’t think that the VAT will make much difference. The problem is when you have chinese manufacturing importing their own goods at a much lower cost than a UK based seller could get the same goods for – there will always be this difference which I don’t think can be sorted with laws and rules.
eBay are such snakes. They’ve known about this for years and haven’t done anything.
Have to agree with the comment above about ebay been snakes. I have reported many sellers to ebay and also many non compliant sellers have been featured in many national newspaper
EBAY get your act together
This change isn’t as wide ranging as it initially looks. It says:
“It will only apply in relation to sales made in the UK for VAT purposes, i.e. where the goods are located in the UK at the time the consumer pays for them or the date they are dispatched to the consumer (whichever happens first).”
So it basically only applies to those non-EU sellers that have setup a UK fulfilment centre. It won’t affect those that sell VAT free direct from China or the US even if they are well above the VAT threshold.
At a quick glance, it looks as if only repeat or large scale offenders will be targeted, and so if a Chinese seller merely closes down any account which is at risk, and then opens another one – what will be done then ?
Who is going to be able to prove that it’s the same Mr Wang, especially if several companies use the same trading address in China ?
I’ve been watching vatfraud.org list of eBay sellers over last 3 months.
I have seen a lot of accounts listed on the site close or stop listing products located in UK.
Most of the big ones. one £10million account, several £8million accounts and lots down to £1million
I think it over £100,000,000 closed so far.
So that’s a good start. Only £900,000,000 to go
vatfraud.org has also just published a list of 100 Amazon sellers – it will be interesting to see what happens to them too
This can only be a good thing to other sellers like us.
HMRC, eBay and Amazon are aware of the vatfraud.org website.
If HMRC can use these lists and pass on the details to the marketplaces many hundreds of millions of evaded VAT will be solved overnight.
ebay and Amazon will be concerned as the last thing they want is to pay the VAT for their tax avoiding overseas sellers who suddenly vanish and who they cannot contact. And UK sellers have the power to grass unfair tax avoiding overseas competition at any time by filling in the HMRC form https://online.hmrc.gov.uk/shortforms/form/TEH_IRF?dept-name=TEH&sub-dep%20%20t-name=&location=39
For ebay and Amazon they will want to be certain that they can communicate with overseas sellers if they need to, and if they stall when responding to HMRC investigations then this will only increase suspicion making any investigation more intense and opening up what could be for ebay and Amazon a can of worms. It really is up to sellers to point HMRC in the right direction.
The question is do ebay and Amazon want to continue taking the risk of permitting tax avoiding overseas sellers an opportunity, or will they do the right thing?
I found a seller on ebay who was operating through a limited company in the UK but declared in his accounts that his wife owned the Chinese wholesaling company that was their sole supplier. The company showed a substantial loss in its last set of accounts possibly generated through selling on at an apparent loss. This position no doubt could continue so long as the directors believed that its main creditor was unlikely to call in its debts. If VAT was being paid on an inflated import price then surely this could probably give rise to a rebate ?
HMRC should freeze any amazon overseas FBA account and there FBA stock that are not VAT registered , give the seller 90 days to pay there ourstanding vat from when they started selling via FBA or sell there stock at auction if not paid within the 90 days
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Earlier this evening I was reading an Amazon forum, where the seller had been asked by the buyer & Amazon to refund the buyer the inport duty they have had to pay when their order arrived in the UK.
The HMRC, have so easily within their grasp a tool they & RM have so long negleected to use properly.
Customs imports @ Heathrow handle a great deal of small packets shipped from China & other overseas places, that are shipped a ‘gifts’ and thus avoiding any duty or VAT.
HMRC & RM could get together to sort each order/Packet (yes it will be alot of work, but easiler, quicker & cheaper trying to contact sellers in say, China.
By inspecting packets, any and all that seem to be commercial items, will generate duty & VAT payable by the buyer in the UK before RM hand them over.
At this point the buyer will be complaining to the seller who (if Amazon rules are implimented) and they actually advertised/listed on the UK site. are responsibile for any duty/VAT payable.
Overnight after a good few complaints those sellers will get masses of bad feedback, have to issue masses of refunds and those same seller will have to increase their prices to include the possibility of Duty/VAT.
This alone will not only give HMRC a big income increase, it will identify those regular overseas sellers importing under the radar to the UK.
it will also level the playing field a great deal for UK sellers, at a stroke these low, low Cjinese prices are increased by 20%+ at least. UK/EU buyers will then think long and hard, that saving a smaller amount by buying in China (much of the stuff is poor quality anywayi) may justy not be worth it.
To me this is the quickest & easiest way to crack this nut wide open. Much of the infristructure is probably already in place & within a few months the UK Government would see an increase in Duty & VAT receipts, without all the huffuing & puffing needed to get the sellers in China to co-operate.
I do hope HMRC take this on board, it could just be the way forqwqard with thgis matter.
i dont think HMRC understand these sellers have no intention of paying vat/corparation tax etc , HMRC need to be ruthless and take off the kids gloves
close there ebay/amazon accounts , freeze there paypal/amazon payment accounts , it is as simple as that