On 15 March 2018 a new VAT law came into effect whose purpose is to ensure that sellers which sell through online marketplaces pay the right amount of VAT on the goods they sell in the UK (FA 2018, s 38).
This new law will primarily affect the big players such as: Ebay, Amazon and Facebook, but it also applies to companies which sell their own goods online and invite other companies to sell parts or products alongside. For example, a manufacturer of coffee making machines may allow coffee suppliers to advertise on their site and sell coffee pods to use in the machines.
The company which operates the online market place must check that the sellers which offer goods on that site are registered for VAT if they are required to be so registered.
Overseas businesses must be registered for VAT in the UK if they sell VATable goods to UK based customers which are either:
- stored in the UK, or
- will be imported into the UK by the seller.
Also the overseas business doesn’t have a business establishment in the UK. There is no de-minimise threshold of sales from overseas suppliers before a VAT liability is incurred.
UK based businesses must be registered for VAT in the UK if their VATable turnover exceeds £85,000 in any 12 month period.
If the online marketplace knew, or should have known, that an overseas seller should have registered for VAT in the UK, the marketplace can be made jointly and severally liable for any unpaid VAT due on a sale an overseas seller has made through its site. The marketplace must stop such unregistered sellers from offering goods through the site, and will continue to be liable for the VAT due until the overseas seller meets its UK VAT obligations.
Written by the Tax Advice Network