What you need to know?

HMRC are currently approaching both sellers directly and via the marketplaces such as Amazon and eBay searching for non-VAT compliant non-UK sellers.

What are they looking for? 

  • If you are a non-resident UK business and hold stock in the UK, either in a 3PL center such as Amazon FBA, you have created a taxable supply and have an obligation to VAT register in the UK immediately, there are no thresholds to exceed. For further information read https://www.gov.uk/guidance/vat-overseas-businesses-using-an-online-marketplace-to-sell-goods-in-the-uk
  • If, for example, you have been selling via Amazon FBA, HMRC will want to know how much you have sold and when you started selling on Amazon. In some cases, HMRC have asked for a seller’s Amazon login details to see first-hand the seller’s transaction history.
  • Amazon has also now got in touch with some sellers stating that the seller can no longer continue to trade on their Amazon website until HMRC are satisfied that the seller is compliant. HMRC require the seller to provide a lot of information including sales and purchase information; Amazon login details; annual accounts; import documents etc.

What are the Consequences of Non-VAT Compliance in the UK?

If a seller has been trading in the UK for many years without a UK VAT number, HMRC does want the seller to pay the back taxes.

  • There has been talk of an amnesty previously but currently there are no plans to implement one – HMRC’s reasoning – the non-compliant non-EU sellers have put many compliant UK online sellers out of business as the UK sellers have not been able to compete because they have had to add 20% VAT on their sales – it is therefore a sensitive subject.
  • If a seller realizes they are non-compliant and approaches HMRC, any applicable penalties and interest payments will be a lot less than if HMRC finds the non-compliant seller.
  • Once a seller registers for VAT and has to catch up on a lot of historical returns which means they will have a lot of back-dated taxes to pay, HMRC will give the seller ‘time to pay’. As long as the seller offers a reasonable payment plan, it will be accepted – eg. If a seller owes £100,000 in UK VAT and offers to pay over 24 months, this would be considered acceptable.

What Happens Next?

HMRC’s primary goal – to recover and continue to collect obligatory VAT on online sales – they don’t want sellers to stop trading because of a hefty historical VAT bill, therefore they will look at each case on its own merit.

HMRC do understand there has been a lack of information around the online selling VAT rules, however, with exposure provided by the likes of the Amazon campaign to ensure VAT compliance, ignorance will no longer be an excuse – if you know you’ve been non-compliant – now is the time to own up – before they catch up with you!

We’re Here To Help!

If you have been approached by HMRC directly or via a marketplace and don’t know what to do, or you think you need to VAT register as possible – please get in touch. SimplyVAT.com will help you navigate the VAT registration and audit processes and ensure you continue to trade both successfully and compliantly.

Contact us today at [email protected]