The government is to extend HMRC’s powers to combat online VAT fraud, with new legislation to be effective from April 2018, the Chancellor announced in the Budget
The measure will mean HMRC will hold online marketplaces jointly and severally liable for any future unpaid VAT of a UK business arising from sales of goods in the UK via that online marketplace. HMRC will also extend new rules to online market place for non-UK seller relating to instances where marketplace knew or should have known that the non-UK business should be registered for VAT in the UK.
The Treasury says this extension will help tackle the UK hidden economy and eliminate the risk of overseas traders establishing a UK shell company simply to escape the existing regime. This will come into force on Royal Assent in the spring
The policy will require online sellers to display their VAT number on the online market place, and require online marketplaces to ensure that VAT numbers displayed for businesses operating on their website are valid.
In addition, the Treasury says the government expects digital platforms to play a wider role in ensuring their users are compliant with the tax rules, and will publish a call for evidence in spring 2018 to explore what more digital platforms can do to prevent non-compliance among their users.
The Treasury’s costings suggest the moves will bring in an additional £10m of tax in 2019/2020, rising to around £45m extra annually each year from 2020/21 to 2022/23.