News added on 30.04.2018

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Online marketplaces urged to sign an agreement with HMRC to tackle VAT fraud

HMRC is asking all online marketplaces operating in the UK to sign an agreement to help tackle online VAT fraud and errors taking place on their platforms. What are the consequences?

What does the agreement involve? HMRC recognises that online marketplaces are vital to the success of many UK businesses but estimates that the tax loss from VAT fraud and error on such platforms was between £1 billion and £1.5 billion in 2016/2017.

The agreement is a bid to reduce this and requires 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 compliant with the VAT rules, and setting up a system to take appropriate action.
  • Finding a suitable and lawful way to provide HMRC with information about their sellers, when requested.

Are online marketplaces legally required to sign up? No, but HMRC will publish a list of online marketplaces that do sign up. If the online marketplace fails to meet its obligations, it will be removed from the list. There is clearly a reputational risk of being perceived to facilitate tax evasion by either not signing the agreement or being removed from the list.

Are there any other implications? Online marketplaces that sign the agreement may need to update the contracts they have with online sellers to ensure they are lawfully able to provide HMRC with information about them. Systems will also need to be implemented where they do not already exist to allow online marketplaces provide data that will be sufficient to allow HMRC to:

  • Identify individual business sellers.
  • Calculate the value and volume of UK sales of individual businesses over a prescribed period.
  • Contact the individual business directly.

Online marketplaces will also need to update their help and support to either warn sellers about their obligations or direct them to HMRC’s guidance.

If you’re an online marketplace and want to sign the agreement with HMRC or would like more information you can contact it at indirecttax.vatsncfteam@hmrc.gsi.gov.uk.

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