In last year’s Autumn Budget, the Chancellor announced that 2018 would introduce “joint and several liability” for tax in online marketplaces.

What does the legislation say?

Following the Budget, a new policy titled “VAT: extending joint and several liability for online marketplaces and displaying VAT numbers online” was introduced.

HMRC will be able to hold e-commerce platforms jointly and severally liable if VAT is not paid on goods sold to the UK from non-UK businesses via an online marketplace.

These marketplaces will also be responsible for displaying a VAT number for all sellers which appear on their platform that have one as well as ensuring these numbers are correct and valid.

The new rules will apply to all online marketplaces, including the most well-known e-commerce platforms such as eBay, Etsy, Amazon and NotOnTheHighStreet as well as alternative online vendors like Airbnb and Uber.

For example, if a seller on eBay earns over the VAT threshold of £85,000 per year from their sales, they are required to register for VAT. If they fail to do this, and therefore evade the tax they owe, eBay themselves will also be held responsible.

Why have the changes been made?

The government stated that the main objective of these changes is to “help level the playing field for businesses” by making sure VAT is paid on all sales of goods made in the UK.

These new powers will strengthen HMRC’s operational processes, encourage marketplaces to ensure their businesses comply with VAT registration rules, and allow consumers to make informed decisions on who they choose to buy from with confidence.

The new legislation is built upon the previous changes made in the 2016 Budget. At this point, new measures were introduced to help tackle online VAT evasion and non-compliance in the tax system.

These rules meant online marketplaces could be liable for VAT unpaid by their oversea retailers. Following these changes, HMRC saw VAT registration applications from internet retailers increase tenfold in just one year.

What impact have these changes had?

These new changes will no doubt have an impact on new online marketplaces looking to launch in the future. Some have argued that registering for VAT could put some people off from launching online shops, inhibiting the development and growth of the online sector as well.

Many platforms have already responded to the policy. eBay stated that all their traders who have given their VAT numbers previously will now have it displayed beside each of their listings on the site – this was previously optional.

Amazon UK also announced on their Seller Central page a short update stating that, when the UK Finance Bill 2018 comes into effect, that Amazon Marketplace will be required to “block non-UK sellers who store goods in the UK from selling through Amazon.co.uk if the seller doesn’t not comply with its UK VAT registration requirements.

“We recommend that you upload your UK VAT number in Seller Central before March 5th, 2018 to ensure smooth functioning of your account.”

Selling online

Many successful businesses have been built using online platforms like eBay, Etsy, Amazon and NotOnTheHighStreet. If the legislation works the way intended, UK-based VAT-registered sellers should feel less downward pressure on the prices they can charge because their competitors will have to charge VAT just like they do.

For more information on VAT and moving some of your sales to online platforms, please call us today on 01606 333 900 or email hello@burtonbeavan.co.uk.