In a move designed to protect UK retailers, last week’s Budget contained measures which will impact online market places, fulfilment houses and other businesses in the supply chain, such as transport and logistics operators and Customs agents.
The measures are intended to crack down on non-EU businesses which sell goods online to UK customers, without paying the VAT and Customs duty due. Government figures suggest that between £1bn and £1.5bn of revenue is lost each year through this type of evasion.
The intention is to implement a scheme of registrations for fulfilment houses from 2018. Under the proposed scheme, fulfilment houses will be required to register with HMRC and will need to demonstrate that they undertake due diligence on the suppliers who use their facilities and also the goods moving in and out. Only if the fulfilment house can demonstrate that it can identify that VAT and duty has been properly paid on imported goods and that the sellers are registered to charge VAT on their sales, will they be accepted for registration. Those who fail to register or continue to trade having been removed from the register will be liable to penalties, including possible criminal sanctions. The scheme will provide HMRC with the information required to clamp down on illegitimate traders.
The government is also consulting on the possibility of preventing goods belonging to non-compliant traders being delivered to fulfilment houses, therefore disrupting the fraudulent activities. HMRC want businesses in the supply chain, such as transport and logistics operators, to only deliver goods to registered fulfilment houses. The consultation seeks comments from the industry as to how this could work in practice.
Other measures include greater powers for HMRC to direct that non-EU online sellers appoint a UK Tax Representative and/or demand payment of security against future VAT liabilities, to ensure compliance. Online market places, such as Amazon and eBay, could be made liable for the VAT evaded by traders who are found to be evading VAT and duties, and thus undercutting legitimate traders.
Those involved in the sector are being encouraged to take part in the consultation, which ends on 30th June 2016. The questions which HMRC are seeking responses to include the impact of increased record keeping requirements and also the extent to which logistics companies are aware that they are moving goods to and from a fulfilment house.
Read more about the implications of the Chancellor’s budget with Menzies summary and sector review.