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HMRC has asked all online marketplaces operating in the UK to sign an agreement to help to tackle online VAT fraud and errors on their platforms.
The pact asks online marketplaces to commit to:
- educating online sellers at home and abroad about their UK VAT obligations;
- responding swiftly when notified by HMRC that sellers are not paying VAT and setting up a system to take action; and
- providing HMRC with information about their sellers when requested.
HMRC will publish a list of online marketplaces that are signatories and remove those that fail to meet their commitments.
Jon Thompson, HMRC’s chief executive, said: ‘The UK has led the way in holding online marketplaces accountable for VAT fraud on their platforms. The agreement goes further to tackle this issue, with online marketplaces committing to helping their sellers understand their tax responsibilities and ensuring we have the information to take action against those who do not play by the rules.’
The agreement builds on the joint and several liability (JSL) rules, introduced in September 2016, which hold online marketplaces accountable for VAT fraud committed by sellers on their platforms. Since then, HMRC has opened about 2,100 investigations into non-compliant overseas businesses and issued 1,300 JSL notices to online marketplaces.
Sue Rathmell, VAT director at MHA MacIntyre Hudson, said: ‘The agreement outlines how HMRC and online marketplaces will work together, share data about online sellers and deal with non-compliance. While it could represent a massive commitment by online marketplace giants Amazon and eBay, and is a positive step by HMRC, agreement from smaller markets shouldn’t be downplayed as their involvement is vital – otherwise sellers could simply move to smaller marketplaces to avoid HMRC’s grasp.’
She added that the agreement would transform the way tax fraud is managed. Describing it as a ‘peer-to-peer policing approach’, she said: ‘Those that register will put pressure on others to sign up as well. Tax fraud impacts the entire UK public and marketplaces can’t turn a blind eye – they must play a wider role in ensuring users are tax-compliant.’
Dominic Arnold, partner at Moore Stephens, said: ‘These proposals are quite unprecedented from HMRC. It is asking online marketplaces to look for signs of tax evasion among its users and report them to the tax inspector. It is taking the outsourcing of tax compliance work to a new level and we expect this initiative to lead to a sharp rise in HMRC prosecutions of small e-commerce traders.’
HMRC has published guidance on the agreement at tinyurl.com/yak55etg.
