The problem of non-EU NETP VAT traders selling goods to customers in the UK via online marketplaces such as eBay and Amazon without registering for VAT has long been identified as a problem. Whilst based outside the EU, they sell goods located in the UK without charging UK VAT thereby undercutting UK businesses by 20%. Though particular publicity has been given to Chinese sellers recently it is by no means an issue limited to them and extends to both EU and non-EU tax dodging traders.
For some years now HMRC have been using a web robot in an attempt to identify those not complying with their VAT obligations. The robot is an advanced search engine designed to spot high volume traders that fail to register for VAT. Initial estimates were that this initiative would bring in an extra £1m of VAT revenues a year.
HMRC have said: “We recognise concerns that businesses and individuals trading online may appear to be less transparent to the authorities and that those involved may be less compliant.
“However, we are cracking down hard on all forms of tax evasion, regardless of where it occurs or who commits it. We are determined to tackle deliberate non-compliance to ensure that the tax system operates fairly and efficiently to create a level playing field for all.”
With the introduction on 1 January 2015 of new VAT rules for B2C supplies of Broadcasting, Telecommunication and eServices (see our earlier VAT blog article) which now require overseas suppliers to charge UK VAT to UK customers, it is likely that the problem will only be exacerbated.
Whilst there is a degree of co-operation between EU tax authorities, it is difficult to see what HMRC and the EU Commission can realistically do to address the problem of non-compliance by non-EU businesses.
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