There were two headline changes to VAT announced in the UK budget today.
The first of these was that the registration threshold for established businesses will increase to £83,000. The same increase and new value will also apply to the registration threshold for EU acquisitions.
The second headline was that HMRC are to be given significant new powers to combat fraud which takes place by businesses involved with e-commerce. This is targeted at overseas businesses which store their stock in the UK before delivering them to private individuals also in the UK. The UK is losing VAT revenue from these activities via a combination of businesses not registering for VAT when they should or by fraudulently using other business’ VAT numbers.
Going forward, HMRC will have the power to direct that a business needs to appoint a VAT representative in the UK. This power will be used in cases where HMRC have identified overseas traders that are high risk and/or continue to be non-compliant with the UK VAT rules. If the overseas trader still doesn’t comply with its obligations then HMRC will have the power to hold the online marketplace that the trader uses joint and severally liable for any VAT debts. However, HMRC have clearly set out that this will be a “last resort” option and that in the first instance they will attempt to work with the marketplaces. To this end, the marketplaces will be given the opportunity to take action themselves (i.e. by securing compliance from its customer or removing it from use of the marketplace) in order to avoid being held jointly and severally liable.
These new rules give HMRC some significant powers to help them fight the growing issue of VAT avoidance by traders using online marketplaces. It is estimated that by 2020/21 HMRC will be receiving an additional £365m as a result of the measures taken in this budget and therefore all businesses involved with selling in this way need to consider the implications of the changes for them and if it means that they need to make changes to their current operations.