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UK acts on foreign seller £2bn VAT fraud

  • Sep 16, 2016 | Richard Asquith

UK acts on foreign seller £2bn VAT fraud

The UK’s HMRC has gained new powers to counter foreign seller VAT fraud on online marketplaces - estimated to cost up to £2 billion per annum in lost revenues. The measures come into place following the royal assent of the UK Finance Act 2016 on 15 September.

Missing VAT from foreign sellers

Non-resident sellers holding goods in UK warehouses to sell to consumers are liable to register and charge UK VAT. However, it is believed that hundreds of foreign sellers, principally from China, are not correctly registered or charging UK VAT at 20%. Aside from failing to collect and remit the VAT due to HMRC, it has given the foreign vendors an unfair price advantage over domestic sellers.

New UK powers on VAT evasion

HMRC now has the backing to screen for high-risk offshore sellers likely to be evading VAT in this way. Factors to identify these sellers include: failure to VAT register; not filling returns; or failing to remit the correct VAT. Such sellers may then be required to appoint a UK VAT representative to oversee their ongoing compliance. The representatives will become jointly and severally liable for any missing VAT.

HMRC may also order marketplaces to remove any sellers who fail to comply with the above steps. This includes issuing a liability notice to the marketplace. If the marketplace fails to remove the seller, they may also be held liable for the missing VAT.

Need help with your UK VAT compliance?

Researching UK VAT legislation is the first step to understanding your VAT compliance needs. Avalara has a range of solutions that can help your business depending on where and how you trade. 

VP Global Indirect Tax
Richard Asquith
VP Global Indirect Tax Richard Asquith
Richard Asquith is VP Global Indirect Tax at Avalara, helping businesses understand their compliance obligations as they grow globally. He is part of the European leadership team which won International Tax Review's 2020 Tax Technology Firm of the Year. Richard trained as an accountant with KPMG in the UK, and went on to work in Hungary, Russia and France with EY.