VAT News

UK-Report released on online seller VAT fraud

Following a session in the House of Lord's public accounts committee recently, a follow-up report has now been released detailing the findings. The session primarily concerned the measures undertaken by online retail platforms to ensure that traders selling through the platforms were acting in compliance with current UK VAT law.

The historic issue has been that traders not established within the EU have used online platforms, such as Amazon and Ebay, to sell goods into the UK and EU market. This involves moving physical goods to the UK in order to quickly fulfil customer orders. Once sales of this stock are made, a UK VAT registration obligation generally arises, but it is clear that many traders do not comply with this.

The main findings of the report were that the online platforms continue to profit from the non-compliance, and that more efforts are required in order to reduce these levels. The report also found that the UK authorities have previously been too cautious in pursuing the traders involved, and that the annual tax loss may be in excess of the estimated £1bn-£1.5bn.

Increased action is particularly required as the industry grows at a phenomenal pace, and there will be further issues associated with Brexit. Whilst Amazon and Ebay have commented saying they continue to take action, the report states that this must be increased, and indeed HMRC do have the power to hold the platforms jointly and severally liable for outstanding tax. To this end, HMRC should act with more urgency, and to date, no traders have been prosecuted for this non-compliance.

The public accounts committee have urged HMRC to put in place co-operation agreements as soon as possible in an effort to reduce non-compliance.

It will be interesting to see the steps platforms now take in order to minimise tax loss encountered through these activities.

Related articles

UK-Implications of a 'no-deal' Brexit

The UK government has released guidance on the VAT impacts of the UK leaving the EU with no deal negotiated

Read more
South Korea - VAT has been extended to foreign cloud computing

The scope of VAT has been extended to foreign B2C cloud computer services.

Read more
Romania postponing VAT cut

Romania is considering postponing cutting the19% VAT rate to 18% for 2019.

Read more