Online sellers – VAT compliance; Area of focus for Revenue
EU tax authorities have been clamping down on VAT compliance for cross border transactions.
Tax authorities within the EU are focusing on online sellers and the amount they believe is lost… €5 billion in VAT! (We can see why they might focus their attention here).
A key reason for this clampdown is online sellers failure to understand the place of supply rules for supplies of goods and the requirement to register for VAT where place of supply rules are breached.
For B2B supplies there is a zero turnover threshold in place for VAT registration for non-established traders, so some businesses are failing to meet their VAT compliance obligations by not registering for VAT in the correct member states.
Operating through the use of fulfilment centres (online platforms for selling products), provides for a primary failing point in managing VAT compliance.
Many people believe the fulfilment centre will ‘take care of’ the VAT issues in particular countries, which may not always be the case.
It is important to understand how the business is operating and the client relationship. Are you acting as principal or agent?
HMRC’s recent stance to make online selling platforms jointly and severally liable has increased the pressure to fully comply; one recent case taken by The VAT Practice highlights these problems where the online platform blocked the Irish businesses trading account for over a month until the business could verify its local VAT registration requirements. This pressure identified the need for the business to be registered in three other member states, penalties for failure to register on time were incurred, together with the significant impact to its trading income.
For B2C services, a similar issue is occurring where goods are not located in the same member state where the seller is established and this can result in failures to register for VAT in the correct member states.
The crackdown on compliance in the UK has already begun. HMRC is focusing on overseas online sellers operating in the UK.
Over the past number of months, the revenue in Ireland have also commenced gathering information as their first step in establishing legitimacy of business and, gathering information on the location of the goods and marketplaces involved, to assess whether the business is fully meeting VAT compliance requirements in the EU.
If you are unsure if your business is fully compliant, always check with your advisor. Get advice in writing and if you still feel unsure, get a second opinion.
Getting specialist advice and ensuring, with an expert, that the advice you are using is always beneficial. It gives a comfort factor to you, the business owner. The one surprise no-one ever wants to receive is finding out from Revenue something is incorrect. Finding out yourself and correcting your errors is always preferable. Especially as it can limit the amount of potential penalties (if there were issues).
For queries relating to specialist VAT areas, I engage with Nick Ryan at The VAT Practice on a regular basis. I believe the fear in using an ‘expert’ is the costs that might be involved. In looking at the cost / benefit of using the VAT Practice services, I’ve always found the costs to be reasonable and clients have been pleasantly surprised by the reasonable level of fees and the comfort factor they gain from knowing the information is from an expert.
The article above has been drafted using Nick’s blog on the subject back in March this year. The VAT Practice can assist with any online sellers queries and offer advice. They can help set up the appropriate VAT registrations, setting up any access required to online tax portals and managing VAT compliance reporting requirements in each member state. If concerned about your online business VAT registrations in various countries, please feel free to contact me or the VAT practice and ensure you are fully compliant.
Some reading material for people interested:
Contact details :
The VAT Practice – email@example.com reference ‘Online sales’
Wendy – firstname.lastname@example.org