VATlive reports on the UK Budget, which introduces a strange new VAT rule. In practice, this will almost exclusively apply to eBay and Amazon. It is all about “fraudulent” sales of goods (not online services!) from China into the UK, where the seller does not report any VAT to HMRC.
VATlive says that the new rules will include:
- “The obligation of fraudulent sellers to appoint UK VAT agents;
- The agents will be responsible for UK VAT registering the e-commerce sellers, and filing VAT returns and remittances [I would be surprised if eBay and Amazon would take on that liability, MH];
- If no agent is appointed, then the UK may make the e-commerce platforms [read: eBay and Amazon, and potentially PayPal, MH] liable for any missing VAT;
- Fulfilment houses [read: eBay and Amazon (or do they mean the freight forwarders?), MH] to apply a new due diligence regime to detect VAT fraud in this area on behalf of HMRC
It is believed that millions is being lost each year as largely China-based online sellers of goods to consumers have failed to UK VAT register, as required. This has resulted in heavy losses of VAT. It is also putting UK domestic sellers at a severe competitive disadvantage since they must charge 20% UK VAT.”
I must have misread this news. It only seems to apply to the B2C supply of goods, where a non-EU seller ships from outside the EU into the UK. Errrr… what about UK Customs? They capture import VAT on goods that exceed the threshold for items of low value, right? What is the “fraudulent” leakage of “millions”? Does HMRC now expect eBay / Amazon to force the seller to be the importer of record, pay import VAT, deduct import VAT paid and then account for domestic VAT at the same rate and same amount? Sounds really odd.
The issue could not be about fulfilling orders to the customers out of a domestic UK warehouse – those locally warehoused goods have passed UK Customs as well and import VAT has been paid on them.
The only thing that I can think of is that HMRC tries to circumvent the VAT exemption for imports of low value. But this exemption is entirely optional for Member States and can be fairly easily removed, particularly using the anti-fraud argument.
Someone please enlighten me.