Budget 2016: Changes Affecting Overseas Businesses and Online Marketplaces

Announced in the 2016 budget were new measures to tackle VAT evasion through online sales.  The measures in question will provide HMRC with new discretionary powers aimed at ensuring overseas businesses comply with UK VAT legislation in the same manner as UK businesses.


Under the proposed changes HMRC will have the power to ensure compliance of overseas business with UK VAT legislation by way of;


(i)                  compulsorily registering the business for UK VAT,

(ii)                requiring the business to provide a form of security; or

(iii)               directing the business to appoint a VAT representative in the UK.


These measures also allow HMRC to direct an overseas business to appoint a VAT representative established in the UK who may also be held joint and severally liable for VAT due to HMRC – HMRC will seek to obtain the VAT debt from the VAT representative initially. In the event that a VAT representative has been appointed but there is still a significant risk to the revenue, the relevant online marketplace will be contacted.  HMRC will contact relevant online marketplaces that provide the platform for the non-compliant overseas businesses to trade in the UK and put it on notice that it may be held joint and severally liable for VAT relating to the future taxable supplies made by these businesses. As a part of this joint and several liability notice, a period of time (normally 30 days) will be stated in which the online marketplace can avoid being held liable by securing compliance from the relative overseas business, including its’ removal from the online marketplace.


If you or one of your clients is an overseas business and provides goods to UK consumers via an online marketplace, please call out free VAT helpline to establish how this strengthening of existing legislation will affect your business and trade undertaken in the UK.


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