Her Majesty’s Revenue and Customs (HMRC) warned in a tax guidance that overseas online retailers must pay VAT on items sold in the UK.
The tax agency said VAT liability applies to overseas sellers supplying goods already in the UK at the point of sale to consumers through an online marketplace. It also applies to:
- UK VAT representatives for overseas sellers, and
- Online marketplaces allowing sales by overseas sellers.
This ruling reportedly applies to such mega-online retailers as Amazon and eBay. They would be responsible for VAT fraud committed by sellers using their websites. According to the Guardian, a UK newspaper, Amazon already “has been conducting a review of seller VAT compliance in the UK.”
An overseas online retailer will, according to HMRC, be established in the country where the functions of its business’s central administration take place. In working this out, the retailer must take account of where:
- Essential management decisions are made,
- Its registered office is located, and
- Management meetings take place.
HMRC says that, if an entity isn’t sure it’s an overseas seller after considering these factors, the deciding factor is where essential management decisions take place.
An online marketplace is a website, or any other means by which information is made available over the Internet, through which those other than the operator are able to offer goods for sale, whether or not the operator also does so. It doesn’t matter if the online marketplace isn’t established in the UK or selling its own goods over the Internet.
Overseas sellers making their supplies as a business activity in the UK must register for VAT in the UK. Once registered, they must charge VAT on UK sales and account for and pay that tax to HMRC.
HMRC warns that operators failing to meet the requirements can be held “jointly and severally liable” for the tax from the date of any liability notice. UK VAT representatives of an overseas seller failing to meet the tax requirements can also be held jointly and severally liable from the date they became a representative.