VAT News

UK Proposals to impact on On-line trading – “Fit & Proper” VAT standards for Fulfilment Houses


The government has announced a package of measures aimed at tackling rapidly growing online VAT evasion. It is recognised that the likes of Amazon and eBay have provided great opportunities for businesses in the UK but there’s been a significant rise in overseas suppliers storing goods in Britain and selling them online without paying VAT and the Government is now targeting such abuse.

There two key points of interest are overseas businesses and online marketplaces.  HMRC is strengthening existing VAT legislation by directing overseas businesses that should be registered for VAT in the UK to appoint a UK-established VAT representative and giving HMRC greater flexibility in relation to when it can require some form of security to cover the VAT likely to be payable.  

In addition to this, HMRC will also have new powers to make online marketplaces jointly and severally liable for the unpaid VAT of overseas businesses who are non-compliant with UK VAT rules. HMRC is going further and are consulting on how to counter the number of import ‘fulfilment’ houses which are abusing the UK VAT rules and avoiding correct VAT declarations; Fulfilment House Due Diligence Scheme.

The scheme proposed will set out ‘fit and proper’ standards that fulfilment houses will need to meet in order to operate.  Fulfilment houses will have an obligation to register and maintain accurate records.  They will also have to evidence that the due diligence they have undertaken to ensure that their overseas client is abona fide supplier.

 We see this a necessary  step in the Government’s approach to help prevent the avoidance of VAT by overseas business selling their goods in the UK and help our indigenous businesses not to lose out and become uncompetitive. The aim is to introduce the legislation in Finance Bill 2016 and by 2020/2021 the measure is estimated to raise £365m

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