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VAT loophole closes on foreign online cartridge sellers
Now we are through the Brexit transition period the government has introduced a new model for the VAT treatment of goods arriving in Great Britain from outside of the UK that will ensure that UK businesses are not disadvantaged by competition from VAT-free imports.
The new model addresses the problem of overseas sellers failing to pay the right amount of VAT on sales of goods that are already in the UK at the point of sale.
The change was made further to a report by the Commons Public Accounts Committee in 2019 which found that thousands of, mainly Chinese, sellers were evading the tax by using fake VAT numbers and shell companies to sell products in effect tax-free.
“Since 1st January 2021, online prices advertised by many non-UK businesses have increased by around 20%. This reveals the huge cost to the taxpayer over a long period of time, something we could really do without in the current climate,” said Steve Clayton, MD of CTS Toner Supplies Ltd.
HMRC estimated that the fraud across all online sites could be losing the taxpayer more than £1 billion a year. Richard Allen, of the group Retailers Against VAT Schemes, said it was imperative that HMRC investigated sellers that were clearly not compliant before January 1. “The government has done a great job of finally flushing these cheats out of the undergrowth,” he said.
Here are the relevant key measures:
For imports of goods from outside the UK in consignments not exceeding £135 in value (which aligns with the threshold for customs duty liability), the point at which VAT is collected shifts from the point of importation (import VAT) to the point of sale (supply VAT) which will put the onus on online marketplace companies such as Amazon and eBay.
For goods sent from overseas and sold directly to UK consumers not through an online marketplace open market purchase (OMP), the overseas seller will be required to register and account for the VAT to HMRC.
For goods in the UK at point-of-sale sold by an overseas seller through an OMP for sales of goods irrespective of value the responsibility for accounting for VAT will move from the overseas seller to the OMP.
The abolition of low value consignment relief, which relieves import VAT on consignments of goods valued at £15 or less, will position UK retailers more competitively for inkjet sales.
This measure, and the £135 threshold on imports, covers the majority of low value online cartridge sales and is a massive flip for our customers, UK retailers – and, especially, online sellers - who will now be more competitive against Chinese e-tailers.
