UK HMRC Seller VAT fraud eBay and Amazon deal
The UK’s HMRC is to publish in April an agreement it has made with major online marketplaces, including Amazon and eBay, to combat VAT fraud on their websites by sellers. The agreement was committed to following a December 2017 recommendation by the Parliamentary Public Accounts Committee, PAC. Any marketplace failing to meet the requirements of the agreement will be excluded from a new, public listing of compliant websites.
£1.5bn in online seller VAT fraud
HMRC estimates online VAT evasion by marketplace sellers costs up to £1.5bn per annum. It believes that non-EU sellers, mostly from China, account for 60% of this fraud. This new voluntary agreement extends 2017 Budget joint liability rules for the marketplaces where they ‘knew or should have known’ that overseas online businesses should have been UK VAT registered”
HMRC has launched over 2,000 investigations into online VAT fraud in the past 18 months, and employs almost 70 full time and contract staff in its Import Fraud frontline taskforce. On 1 April 2018, HMRC launched its Fulfilment House Due Diligence scheme. This requires any businesses storing goods for non-EU sellers to register with HMRC, and implement basic anti-VAT and customs fraud controls.
New agreement on marketplace data sharing and fraudulent seller blocking
The agreement details how HMRC and major marketplaces will work together to identify and share data on potentially fraudulent sellers. HMRC will publish the agreement in April 2018 and invite online marketplaces to become signatories to it. A list of those who have signed will be published and updated at regular intervals. In the event that a signatory does not comply with the agreement HMRC will remove them from the list.
The commitments made by the signatories to the agreement include:
- Provision of merchants’ data either on an individual basis or on a bulk basis to help spot fraud trends. The requirement will be for the delivery of data on both a voluntary basis or in response to a legal notice from HMRC. At a minimum, the data should be able to assist HMRC identify sellers, including contact details, and enable an assessment of the levels of UK sales.
- Education of VAT responsibilities for sellers. Marketplaces will agree to provide information and education materials to UK, other EU and non-EU sellers on their VAT responsibilities.
- Blocking fraudulent sellers. Marketplaces will act quickly when informed by HMRC of potential seller fraud. Marketplaces will maintain databases of sellers’ VAT numbers, and act within 30 days where sellers fail to properly VAT register in the UK. In cases of ongoing non-compliance, marketplaces will have measures in place, including ‘blocking’ sellers from trading further. The marketplaces will inform HMRC where they have blocked any seller. Online marketplaces agree to inform HMRC within 30 days when they have restricted any seller from selling on a UK marketplace or removed a particular seller from their marketplace for non-compliance with UK VAT legislative obligations.
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