A crackdown on illegal sales of tax-free goods over the internet has fuelled a tenfold rise in the number of online retailers registering for value added tax.
The campaign, launched in March, aimed to stop foreign companies — particularly from China — failing to charge VAT when selling products via sites such as eBay and Amazon.
Jane Ellison, financial secretary to the Treasury said: “These new powers will mean that everyone has to play by the same rules and pay the right tax.”
A spokesman for VATfraud.org, a campaign group set up by retailers said the figures were “a step in the right direction” but there was still much more to do.
“It’s all well and good HMRC handed out 7,185 VAT numbers to internet retailers in the last year; it just proves this fraud is enormous. However what HMRC failed to say is how much undeclared VAT they have recovered from these retailers. Or is HMRC simply giving out VAT numbers without any diligence or investigation into the retailers’ previous online trading history?”
What HMRC failed to say is how much undeclared VAT they have recovered from these retailers. VATfraud.org spokesman HMRC estimated the Exchequer lost tens of millions of pounds to VAT evasion in the run-up to last Christmas, as a growing number of overseas sellers dominated online sales of popular presents.
HMRC said it was too soon to say how much tax had been collected from the new rules, which aim to raise £875m by April 2021. They were introduced by George Osborne, former chancellor, to tackle evasion that “unfairly undercuts British businesses both on the internet and on the high street”.
HMRC can now force overseas retailers to appoint a UK-based VAT representative or provide a financial guarantee. If they fail to pay VAT, the tax authority can tell the online marketplace to suspend the trader and hold them liable for the missing tax if they fail to act.
The warehouses where the goods are stored before being distributed to UK customers, will also have to join a due-diligence scheme by 2018 or face penalties. VATfraud.org said it expected this to be the most effective of the new measures as it would stop online platforms from dispatching products from VAT-evading companies.