Online marketplaces or marketplace websites are getting more popular to both the sellers and the consumers because they offer real convenience and facility to both of them in doing selling and shopping. Amazon and eBay are mentionable examples of such websites as they sell everything to everybody worldwide though there are many other types of marketplaces.
These online marketplaces are also doing great business in the UK. But the latest news is that the UK tax authority has published new regulation on the registration for and application of marketplace VAT (Value Added Tax, indirect tax) on overseas businesses selling goods on an online marketplace in the UK. Here an online marketplace is defined as a website through which businesses other than the website owner is able to sell goods and may include online marketplaces not established in the UK. There is no threshold for the marketplace VAT registration requirement and both the vendors and the operators of the marketplace can be held jointly and individually liable for VAT owed.
Now the UK Government has said that online marketplaces are liable for the unpaid VAT of their vendors. It’s a new regulation aimed at Amazon and eBay but it will affect all the marketplace owners as well as sellers too if they are selling to the UK. Let’s know more about the new regulation for the UK online marketplace taxes.
As an online marketplace owner, you don’t need to be:
- established in the UK
- selling your own goods over the internet
And your overseas sellers:
- sell goods stored in the UK to UK consumers
- don’t have a business establishment in the UK
Your sellers must register for VAT in the UK when they’re overseas sellers making their supplies as a business activity in the UK. However, there is no registration threshold in this situation.
Further information on VAT registration can be found in Notice 700/1: should I be registered for VAT? with specific information available on non-UK businesses.
Vat Requirements
As you are an online marketplace owner, HM Revenue and Customs (HMRC) can hold you jointly and severally liable for the UK VAT an overseas seller owes if they don’t meet their VAT requirements.
And your overseas sellers, after being registered, must :
- charge VAT on their UK sales of goods
- account for and pay that VAT to HM Revenue and Customs (HMRC)
You can find more information on how to account for the VAT your sellers owe in VAT Notice 700/12: how to fill in and submit your VAT Return.
The HMRC will identify high risk overseas sellers who fail to meet UK VAT requirements. HMRC will contact them, asking what action they intend to take, and then will decide their action. If your any overseas seller is failing to meet UK VAT requirements, HMRC can hold you jointly and severally liable for the VAT they owe from the date of any liability notice.
Yet, there are options for them to take and consider. They, however, can withdraw the notice:
if they are satisfied the overseas seller has fully met all their VAT obligations and continues to do so
where the overseas seller is removed from the online marketplace and, after a sufficient period of time, they are satisfied that the overseas seller is no longer a significant risk
You won’t be assessed for the overseas seller’s VAT if you remove them from your online marketplace within the time specified in your liability notice. You also won’t be assessed if HMRC is satisfied the overseas seller using your online marketplace is fully meeting its UK VAT obligations and continues to do so.
You will know more about requirements, appeals and other things here.
The Finance Bill 2016 clears the way for HMRC to impose several and joint liability onto online marketplaces for VAT fraud committed by traders using those marketplaces. As a result, you as an online marketplace owner will now be compelled to proactively monitor, detect, and act on suspected VAT fraud committed by traders using their sites.
Online marketplaces like Amazon and eBay are profiting from fraud by sellers who dodge the VAT they should charge on sales in the UK, a parliamentary report has said. The “unfair and illegal” practice allows sellers based outside the EU to undercut British retailers by 20 per cent, hitting sales hard and forcing many to cut staff or even shut down, said the House of Commons Public Accounts Committee (PAC).
Again, The Guardian says that, online marketplaces such as Amazon and eBay will be forced to police their own websites to prevent billions of pounds of VAT fraud, under a renewed government crackdown on the scam. This step represents the second effort in as many years to close down an estimated £1.2bn-a-year tax fraud and follows a guardian investigation as well as criticism of HM Revenue & Customs for being slow to act. That scam involves foreign companies warehousing products in the UK and selling them, VAT free, via internet marketplaces.
All sellers based outside the EU and selling goods online to UK customers should charge VAT if their goods are already in the UK at the point of sale. According to the marketplace fiscality or fiscal policy theory, the UK government adjusts its spending levels and rates of marketplace taxes to monitor and influence the national economy. Introducing VAT on online marketplace or websites is such an initiative and their new regulation for online marketplace VAT guides you to a good direction.
The chancellor tells parliament that they are taking further action to address online VAT fraud, which costs the taxpayer £1.2bn per year, by making all online marketplaces jointly liable for VAT – [and] ensuring that sellers operating through them pay the right amount of VAT. As a result, online marketplaces will now be jointly liable with sellers for any unpaid VAT where the “online marketplace knew or should have known that the business should be registered for VAT in the UK”. Websites will also need to ensure that businesses operating on their site have displayed valid VAT numbers. Previous legislation, introduced last year, only imposed joint liability if the marketplace had not removed a seller 30 days after being informed by HMRC of a breach.
