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Online marketplaces to assist HMRC on trader VAT compliance

Article posted: 6th September 2018

HMRC has announced it has reached an agreement with a number of online sales platforms, including Amazon and eBay, whereby those platforms will supply HMRC with data that is aimed at ensuring online traders are VAT compliant.

For some time, HMRC has been concerned that not all online traders haven been aware of their VAT obligations or more seriously, have been deliberately avoiding the need to be registered and account for VAT on their sales.

HMRC believes online marketplaces can be highly effective in educating and informing third party businesses to encourage VAT compliance and in providing HMRC with data and other information to assist their investigations and improve compliance.

While the data items available may differ across different online marketplaces, at a minimum the data provided will be sufficient to allow HMRC to:

  • identify individual business sellers;
  • calculate the value and volume of UK sales of individual businesses over a prescribed period (eg, one year); and
  • contact the individual business directly.

In addition, each online marketplace has pledged to have systems in place to take appropriate action whenever presented with evidence of potential non-compliance with UK VAT registration obligations. For example:

  • Include a request for the VAT registration number from the relevant business within the account opening process.
  • Where evidence of potential non-compliance with registration requirements is presented, contact the seller directly to clarify the position within 30 days.
  • Where the concern about non-compliance with UK VAT registration obligations persist, to implement appropriate sanctions up to and including restricting the seller from selling on the UK marketplace or removing them.

While it could be said that HMRC’s main focus of concern is with overseas traders selling items in the UK via these online platforms, the rules and this agreement apply equally to UK-based businesses trading via these platforms. At present the taxable turnover threshold for needing to register for VAT is set at £85,000.

It is clear this agreement will provide HMRC with parcels of information to help it identify online traders who are not meeting their VAT obligations. Such businesses should seek to take action now to make themselves compliant or else they could find themselves receiving an unwanted delivery from HMRC!

Traders who need to be VAT registered should bear in mind also that HMRC’s Making Tax Digital (MTD) project goes live with effect from April 2019. This is being billed as a step to modernising the tax system by increasing the use of online services and software that can deliver tax information direct to HMRC. Businesses should check that they are compliant ahead of the deadline and that they are able to file digitally by the deadline. Further details can be found in our recent blog.

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