HMRC plea to tackle online VAT fraud


HMRC are asking online market places to sign an “agreement” to keep their users the right side of the law when it comes to online VAT fraud.

A picture of a screen with eBay on it

It’s sites such as eBay that are being targeted

HMRC Announcement

“… the agreement will help online market place platforms meet their responsibility to ensure their sellers understand the tax rules, and prevent fraud taking place on their watch.”

We therefore think the intention is to discourage users setting up shop and committing online VAT fraud by avoiding registration. An online marketplace is officially a website, or any other means by which information is made available over the internet, through which persons other than the operator can offer goods for sale.

Since the 25 April 2018, HMRC is asking all online marketplaces operating in the UK to sign an agreement to help tackle online VAT fraud and errors taking place on their platforms.

Online marketplaces have transformed the way people shop, and have helped millions of businesses to sell their products and services. Therefore, HMRC believe the platforms have a responsibility to make sure their sellers understand the tax rules. This will prevent online VAT fraud from happening on their watch.

A picture of eCommerce happening

Agreements will need to be signed

The Agreement

The agreement asks online marketplaces to commit to:

  • educating online sellers from the UK and abroad about their VAT obligations in the UK either via their own help and support or by directing them to HMRC’s GOV.UK guidance;
  • responding swiftly when notified by HMRC that sellers are not playing by the VAT rules, and setting up a system to take appropriate action; and
  • finding a suitable and lawful way to provide HMRC with information about their sellers, when requested.

The last bullet point is interesting. “Lawful” must mean the data protection rules as sites like eBay would need to share the personal data of their customers to comply. Will the market places be obliged to “report” their customers in some sort of de facto Money Laundering Reporting obligation?

We can’t help wondering if HMRC are shifting their workload, their eyes and ears, elsewhere.

It will be interesting to see if the market place organisations will comply. Apparently, the only down side to not complying is that HMRC will not publish their name on a list of platforms that have signed the agreement. Therefore, it’s public shaming through not appearing.

However, about 27,550 applications to register for VAT from overseas online retail businesses have been made since HMRC started to become active in dealing with this issue. This compares with about 1,650 for 2015. Interesting stats.

Fear not, our in house VAT expert Michele can help you with this and any other VAT queries that you may have. Get in touch now to talk with her.