From 1 December 2012, all Non-established taxable persons (NETPs) (HMRC VATREG37000), supplying goods located in the UK are required to register for UK VAT when they make their first supply of goods or services here, regardless of the value. There is no VAT threshold (HMRC VATREG37050)
In 2012–13 there were 612 NETPS registered with HMRC, making retail sales via mail order or the Internet and were responsible for net VAT receipts of £44.8 million (House of Commons – Written evidence from HMRC – Annex A – Point 3).
NETPs register for VAT with HMRC’s specialist NETP Unit based in Aberdeen.
VAT registration options available to NETPs
There are several VAT registration options open to NETPs under HMRC – VATREG37370
1) Appoint a VAT representative – this is a person in the UK who the NETPs appoint to run their VAT affairs. A presentative is completely liable for any unpaid VAT. They also need to sign documents with HMRC which will officially appoint them as the NETPs representative.
2) Appoint a VAT agent – this is a person in the UK who the NETPs appoint to run their VAT affairs. A agent is NOT liable of any unpaid VAT. They also need to sign documents with HMRC which will officially appoint them as the NETPs agent.
3) Register direct with HMRC – the NETPs run their own VAT and submit information.
Direct registration with HMRC is the option that most NETPS elect.
NETPs VAT Numbers
When a NETP registers for VAT, HRMC allocates them their own VAT number registered to their Company Name or an individual, if they are sole trader. Even if the NETP appoints a VAT Representative or VAT Agent, the VAT number will be allocated in the name of the NETP and NOT the representative or agent.
A NETPs VAT Number can be looked up and validated on European Commission VIES VAT number validation.
When a NETPs VAT Number is looked up on the VIES system the address displayed will be the HMRC NETP Unit:
HM REVENUE AND CUSTOMS
8 RUBY PLACE
View an example of a NETPs VAT number on the VIES system here: 975135696
PING ZHU !! OIG.BUY
HM REVENUE AND CUSTOMS
8 RUBY PLACE
View an example of eBay’s VAT number on the VIES system here: 21416127
EBAY EUROPE S.A R.L.
22, BOULEVARD ROYAL
NETPs Failing to Register for VAT
NETPs who fails to register for VAT (VATREG37350) at the right time will be subject to HMRC’s normal penalty regime. The amount of the’ Failure to Notif’y penalty would, as usual, be linked to the business’s behaviour.
Deliberate or concealed non-compliance attracts a higher penalty and cooperation and disclosure will reduce the penalty.
The business may not be liable to a penalty if it has a reasonable excuse for not complying with the rules.
The Crown Prosecution Service have produced a VAT fraud Sentencing Guide. Most NETP’s in our report would have a custodial sentence ranging from 4 to 7 years.
NETPs VAT Returns & Accounting
NEPTs must meet all obligations under UK VAT law. This includes:
- Registering for VAT at the correct time
- Keeping a record of everything they buy and sell in relation to their business in the UK
- Keeping the records needed to complete their VAT return
- Producing records and accounts for HMRC inspection
- Keeping a note of all the VAT paid and charged for each period covered by their VAT return, and
- Paying the right amount of tax on time
EU Distance Seller Regulations.
Under EU distance seller regulations (Trading Standards: Internet auction sites & marketplaces), all registered Business Sellers on eBay.co.uk and Amazon.co.uk need to comply with the following:
- Display VAT registration number
- Display Full Registered Company Name
- Disclose their legal status; Ltd Company or Sole trader
- Display “geographic address’ address of company – not PO box address. Please note there is no definition of ‘geographic address’. Trading Standards view is that this means the physical trading location of the business and a PO Box address is not sufficient.
VAT and eBay Business Seller Policy
eBay Business Sellers policy states:
“Under the Electronic Commerce (EC Directive) Regulations 2002 you must provide the following information in the Business Seller Information section of your listings: your VAT number, if your online activities are subject to VAT.”
However eBay are failing to ensure that all NETPs display their VAT numbers.
As NETPs are required by law to register for VAT, they are therefore required by LAW to display their VAT numbers on eBay & Amazon under EU Distance Seller Regulations.
Trading Standards & HMRC
eBay & Amazon fall under the regulations of both Trading Standards & HMRC.
However they don’t work together to combat fraud on eBay and Amazon; they both have specific separate roles to play.
Trading Standards Responsibilities:
The government do not have a centrally funded Trading Standards Unit that tackles International fraud on eBay and Amazon.
Individual local authority Trading Standards services have responsibility for enforcing consumer protection laws online. This includes:
- Product Safety Standards
- Accurate descriptions and pricing
- EU Distance Selling Regulations
- Financial Fraud
However, they are not able to tackle this problem alone due to limited resources. Trading Standards nationally has suffered an average 40% cut in budgets and 50% cut in staff numbers in the last 5 years, working within the constraints of 0.2% of the total Local Government spend, leaving many individual services with insufficient resources to take on large cases.
Trading Standards does not have the authority to take action against a company or person who is evading taxes; that is the remit of HMRC. However, Trading Standards became involved because of concerns about how this is impacting on UK small businesses and they found it was common for the VAT evading businesses to also be involved in the sale of unsafe or counterfeit products.
HMRC VAT Fraud Team Responsibilities:
The sole purpose of the HMRC VAT Fraud Team is to investigate VAT Fraud in the UK. They are the only people that can investigate VAT Fraud on eBay.co.uk & Amazon.co.uk.
However HMRC have yet to make one prosecution against NON EU VAT Evading Sellers on eBay or Amazon.