Newsletter Autumn 2016

VAT and online markets

UK traders who sell online often complain about being undercut by overseas traders who don’t charge VAT on goods sold to UK customers. If the goods sold by the overseas business are stored within the UK at the point of sale, UK VAT must be charged.

There is no VAT threshold for such overseas traders. If they don’t have a place of business in the UK (a warehouse doesn’t count), VAT must be charged on every sale.

This rule has always applied, but it has not been enforced effectively.

The Government is cracking down on such VAT evasion, but the cure may catch out UK businesses who run online marketplaces. From 15 September 2016 an online marketplace can be held jointly and severally liable for VAT which remains unpaid by an overseas business that sells goods through that marketplace.

If you host or run an online marketplace you should take steps to determine where your participating sellers are based. Those traders who are based outside of the UK must register for VAT, and you need to ask for evidence of that VAT registration.

If HMRC suspect that an overseas trader is not charging VAT, and HMRC get no response from that business, they will send you a 30-day warning notice. This gives you time to take action against the errant trader, either to secure the VAT due, or ban the trader from your marketplace.