HMRC tackles online VAT fraud

19 March 2018

HMRC tackles online VAT fraudNew VAT rules have come into force for online traders and marketplaces aimed at cracking down on tax evasion.

The rules strengthen HMRC powers to make online marketplaces accountable for VAT fraud committed by online sellers on their platforms. These powers are known by the term joint-and-several liability (JSL) for online marketplaces.

If sellers based in the UK or overseas are not paying the correct VAT when selling in the UK, and are not removed from the site following the issue of a notice by HMRC to the marketplace, then HMRC will pursue the marketplaces themselves for any future unpaid tax by those sellers.

The rules make 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 also make sure sellers using their platforms display a valid VAT number on the site.

HMRC said: "This sends a clear message that businesses in the UK and overseas, online and on the high street, must all play by the same rules, protecting traditional high street and legitimate online sellers who pay what they owe."

Mel Stride, financial secretary to the Treasury, said: "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. This behaviour unfairly undercuts businesses trading in the UK that play by the rules, abuses the trust of buyers and deprives the Government of significant revenue that funds vital public services."

Mike Cherry, national chairman of the Federation of Small Businesses (FSB), said: "No business, in any part of the world, should be gaining an unfair advantage in the UK by dodging tax. The new rules … promise to help level the playing field for small UK firms trading online. For too long, those who do the right thing have been allowed to lose out to firms that evade VAT."

He added: "Online marketplaces are vital to the success of thousands of small firms - often a natural complement to their high street shops. Like any good market organiser, these websites have a responsibility to ensure all traders are playing by the rules. Equally, they need to ensure that in complying with the new rules … they don't place any unnecessary admin burdens on small firms."


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