New rules will make online marketplaces accountable for value added tax (VAT) fraud committed by sellers using their platforms.
Using the concept of joint-and-several liability (JSL) for online marketplaces, the rules are intended to clamp down on sellers based in the UK or overseas who fail to pay the correct amount of VAT due when they sell in the UK.
They will do so by making the marketplaces themselves responsible for any unpaid tax that sellers accrue if they are allowed to continue operating on a platform despite HM Revenue & Customs (HMRC) having called for them to be removed.
In addition, as of 15 March 2018, the new legislation also makes online marketplaces liable for VAT where they knew, or should have known, that an overseas online seller should have been VAT-registered but was not.
Marketplaces must now also make sure that sellers using their platforms display a valid VAT number on the site, when they are given one. That, HMRC explains, will help buyers make an informed choice about buying goods from VAT-registered businesses.
Whilst the honest majority pay what they owe, some businesses that sell goods online to UK shoppers are failing to pay the correct amount of VAT, Financial Secretary to the Treasury Mel Stride said.
“Their behaviour unfairly undercuts businesses trading in the UK that play by the rules, abuses the trust of buyers, and deprives the Government of revenue,” he added.
Welcoming the changes on behalf of the Federation of Small Businesses (FSB), Chairman Mike Cherry said they promise to help level the playing field for small UK firms trading online.
Online marketplaces are vital to the success of thousands of small firms, he noted, but for too long those who do the right thing have been losing out to firms that evade VAT.