VAT: Selling via online marketplaces – upcoming HMRC campaign to check place of establishment

HMRC have contacted the CIOT and other stakeholders in their ‘One to Many’ engagement forum, that they have an upcoming campaign for which letters are about to start being issued. This concerns checking the place of establishment status of businesses selling via online marketplaces.

HMRC will shortly be writing to businesses registered at agent or serviced office addresses asking them to provide evidence they are established in the UK. The letter campaign is part of HMRC’s ongoing work to ensure overseas traders operating through online marketplaces cannot undercut legitimate traders by not paying VAT. Businesses should receiving campaign letters from around 22 January, and a draft is attached here.

Project background:

• The letter is aimed at those where HMRC hold information to suggest that the letter recipient may not have UK establishment for VAT. HMRC are undertaking this exercise to ensure VAT records are up to date and the correct treatment of VAT is applied by online marketplaces facilitating the sales for overseas based sellers
• HMRC are only looking for a response where customers receiving the letter believe that they do have a UK establishment. Those who agree they are non-established do not need to respond
• HMRC define UK establishment as a business that:
  • makes essential management decisions and carries out its main administration in the UK
  • has a permanent physical presence in the UK, with human and technical resources to make or receive taxable supplies
• UK incorporation does not automatically provide UK establishment status
• Due to statutory review time limits HMRC are allowing 30 days to respond, which can be extended on a case by case basis upon request.