VAT-registered online sellers must prove UK establishment
HMRC is clamping down on the use of high-volume addresses by online sellers to disguise their principal place of business and avoid VAT.
Many of these addresses are being used by overseas established businesses and some traders are taking advantage of a loophole to avoid being treated as a non-established taxable person (NETP) by online marketplaces.
As a result, some online marketplaces are not collecting and paying the VAT due on behalf of the trader. This gives these sellers a competitive advantage, particularly against genuine UK businesses.
HMRC is writing to VAT registered businesses to ask for evidence to prove they are established in the UK.
A high-volume address is where a single UK address is listed as the principal place of business for numerous VAT-registered businesses. It has been reported that in some cases, more than 10,000 businesses have been registered at a single UK address.
If the business fails to respond to HMRC’s enquiry it will automatically consider the business to be non-established for VAT purposes which could lead to future investigations by the tax authority.
HMRC said that the campaign would ensure that correct records were held on these sellers.
Since January 2021, online marketplaces such as eBay and Amazon have been liable for the VAT from sales made by overseas traders on their platforms.
HMRC believes that some non-established taxable persons who have incorporated in the UK and provided UK address details to marketplaces, have avoided marketplace liability rules.
These sellers do not declare VAT and use this to attain a competitive advantage, cutting prices by 20% and creating unfair competition for legally registered UK businesses.
While the seller can respond directly to HMRC, agents and accountants can also complete the form and send it from their agent email address shown on the VAT registration application. Agents should also copy the business email address into the email when they send it.