Online retailers and overseas sellers rush to register for VAT

Thousands of online retailers have rushed to register for value-added tax (VAT) since HM Revenue & Customs (HMRC) introduced a crackdown on overseas businesses and online sellers failing to comply with UK tax rules.

The changes, which were introduced in late September in a bid to “level the playing field” for all businesses, enable the Revenue to “hold an online marketplace jointly and severally liable for the unpaid VAT of an overseas seller trading goods in the UK via that online marketplace,” HMRC has said.

According to Financial Secretary to the Treasury, Jane Ellison, the “new powers mean that everyone has to play by the same rules and pay the right tax”.

Recent reports suggest that since plans for the new rules were first announced in March, as many as 7,185 online retailers have applied to be VAT registered – comparable with just 695 retailers who registered throughout the whole of 2015.

The figures represent a tenfold increase – and suggest that an increasing number of overseas sellers and online businesses fear the wrath of HMRC, should they be caught out for non-compliance.

Non-compliant businesses and retailers risk being chased by the Revenue over unpaid VAT and potentially being forced to either appoint a UK-based VAT representative or provide a financial guarantee.