Look again at plans to
target online VAT loss
THE Chartered Institute of Taxation (CIOT)
has called on the Government to rethink its approach to ensuring online sellers
pay the correct amount of VAT.
Non-EU traders who sell goods to UK consumers via online marketplaces are not
always paying the correct amount of VAT and duty to Britain's HMRC, even though
these traders should normally register for VAT in the UK and charge VAT on these
sales. Popular online marketplaces include:- eBay and Amazon.
Under HMRC's proposal overseas traders would appoint a UK Tax representative who
will be liable for their VAT and/or would need to provide security to guarantee
payment. If these traders fail to comply and online marketplaces do not help
stop the abuse, the online marketplaces themselves will become jointly and
severally liable for the unpaid VAT.
The CIOT has told HMRC that its proposal is at risk of capturing too many
businesses through the use of imprecisely defined terms, such as a 'fulfilment
house' (which include online marketplaces). This risks many businesses,
including SMEs, being burdened unnecessarily. The CIOT also told HMRC that
it believes the primary targets should be those overseas sellers who seek to
evade the Tax and not legitimate UK businesses which unwittingly deal with them.
Peter Dylewski, Chair of the CIOT's Indirect Taxes Sub Committee, said:-
"We fully support HMRC's will to tackle this issue because internet trading
makes it easy for overseas businesses to sell into the UK, but difficult for
HMRC to ensure that UK VAT is being properly declared.
Our concern with HMRC's proposal is that it targets intermediaries in the supply
chain and not those who are failing to comply. On the 1 hand, this places a
burden on legitimate UK business and on the other hand it may unintentionally
give the impression to potential Tax evaders that they will not be pursued by HMRC.
We would therefore urge the Government to explore a fairer and more effective
The CIOT is encouraging HMRC to explore other possible solutions, such as the
undisclosed agency route; the online marketplace could remit the VAT on the full
sale price of the goods to HMRC and the proceeds (net of its commission) to the
seller. Overseas businesses could opt out of this arrangement if they could
prove they are Tax compliant or not actually in business.
The consultation forms part of a package of measures announced in Budget 2016.