The HMRC got new powers starting from this week. Now they can penalize online marketplaces in case these platforms are used for tax frauds committed by sellers that are using these platforms. According to the new laws which were revealed by Philip Hammond in the Autumn Budget in 2017, the basic objective is to make online retailers and high street more competitive.
In other words, online marketplaces must take responsibility and ensure that sellers that are using their sites will pay the required taxes and prevent tax frauds in the future. In case UK-based sellers or overseas sellers are avoiding VAT whenever they are selling goods and services in the United Kingdom, and they still have access to the online marketplace after the HRMC informs the online marketplace, the HMRC will have the right to penalize these platforms. As a result of that, these websites can expect fines and even recovery of unpaid tax.
Additionally, the new laws will turn online marketplace responsible for VAT in cases when they were aware or should have been aware that overseas sellers should have been registered for VAT, but they were not.
Furthermore, online marketplaces are forced to get information about the VAT number of online sellers and make this information visible on the website. This will help buyers know when they are buying products from a business that is VAT-registered. These marketplaces are supported in their efforts to help online sellers get familiar with the new tax rules.
It’s also worth mentioning that businesses are now able to apply for registration for the so-called Fulfillment House Due Diligence Scheme starting from April 1st. This popular scheme will ask businesses that have stored products on behalf or for overseas sellers from non-EU countries to manage a record and conduct specific checks on products they are keeping stored. According to the Treasury financial secretary Mel Stride, most businesses in the UK pay their taxes, but there is still a significant number of business that sells products online to online shoppers in the UK without paying the required amount of Value Added Tax.
As a result of this avoidance, many legitimate businesses, especially the ones that are working offline are feeling the negative consequences. It is obvious that every business has certain obligations and duties to the state and they must complete these duties.
The United Kingdom is among the countries that have recently revealed increased powers to their agencies to prevent VAT evasion which is usually practiced by overseas sellers. The first time they did this in 2016, more than one thousand overseas businesses that were not following the British laws were banned from selling products in the United Kingdom over the Internet. This measure has made thousands of online business to register for Value Added Tax.
With this latest law and rules, the HMRC has even more powers and can successfully fight VAT fraud and tax evasion.