Ever purchased an item at a nice low price online from what appears to be a UK address, only to find that it’s shipped from abroad? That bargain purchase may be because the seller is ignoring UK VAT rules.
HMRC is launching a new campaign that is aimed at foreign businesses that are registered at a serviced office or via an agent and who are unable to demonstrate that they are established in the UK.
The government’s concern is that overseas traders Selling via online marketplaces are avoiding VAT by failing to declare to HMRC that they are Non-Established Taxable Persons (NETP) for VAT purposes. This puts legitimate VAT-registered traders at a disadvantage.
A NETP making taxable supplies for VAT should have declared themselves to the selling platform as the UK and registered for VAT as the £85,000 VAT threshold does not apply to them.
A foreign business with a UK service address or agent will need to produce evidence to show that it is established in the UK. HMRC requires at least two types of evidence to prove that a business (either):
- Makes essential management decisions and carries out its main administration in the UK.
- Has a permanent physical presence in the UK, with human and technical resources to make or receive taxable supplies.
The type of evidence that it will accept could include:
- Rental, lease or tenancy agreements, with proof of payment, records of the staff the business employs, e.g. Names, National Insurance numbers, addresses of employees and PAYE reference, council tax bills, utility bills and National Insurance numbers for the directors.
Useful guides on this topic
Online marketplaces: VAT & selling goods in the UK
When do you have to register for UK VAT? When is UK VAT payable? What amount is VAT payable on? What information do you have to give the marketplace provider? What will it do with that information?
Non-Established Taxable Persons (NETP)
A business that does not have a business or fixed establishment in the UK is known as a non-established taxable person (NETP). It is required to register for VAT if it trades or intends to trade in the UK.
Side-Hustles & Tax
There has been a lot of confusion online about 'side-hustle' tax