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Blog - Published 16th March 2016

VAT and the 2016 Budget


There was good news for UK retailers in today’s Budget. The Chancellor announced three measures aimed at cracking down on overseas online sellers who fail to account for VAT on goods sold in the UK.

At present, UK retailers who comply with the VAT rules face a significant commercial disadvantage compared to non-compliant sellers, who sell goods VAT free. The measures are intended to level the playing field and help high street retailers be more competitive.

In summary:

  • HMRC will be given greater powers to require overseas sellers to appoint a UK VAT Representative and require the payment of security against future VAT liabilities, therefore ensuring that UK VAT obligations are met. Where overseas sellers still fail to comply, the online marketplace through which the goods are sold could be held jointly and severally liable for the VAT due. We expect this to result in online marketplaces introducing stringent VAT compliance checks for overseas sellers, to ensure that they are not held liable for any underdeclared VAT.
  • UK fulfilment houses will be required to undertake due diligence on the VAT status of overseas online sellers using their services. They will be required to register online and maintain accurate due diligence records from 2018, therefore providing HMRC with intelligence on non-compliant sellers. This could be a significant administrative burden for fulfilment businesses.
  • HMRC are to consult on a new penalty for participating in VAT evasion, which will come into force next year. Although there is little detail available at present, this is thought to be aimed at online market places and fulfilment houses who fail to meet their obligations under the above new measures.

It was also announced that the government will continue to explore other ways of tackling VAT evasion on an international level, including alternative mechanisms for collecting VAT.

Read more about the implications of the Chancellor’s budget with Menzies summary and sector review.

Download the full summary here.
Download the Menzies tax rate card for 2016/17.
For more information about Menzies LLP or to talk to us about the impact of the 2016 Budget on your business and finances, contact your Menzies Relationship Partner or contact Menzies.

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Sean Turner

Senior VAT Manager

Sean Turner is a VAT Senior Manager based in Menzies London Central office supporting SME businesses with their VAT and corporate tax issues.