Sarah Halsted

Written by: Sarah Halsted

Sarah Halsted

Technical Associate Director

Will there be a new VAT responsibility for online marketplaces in 2021?

Over the last few days, reports have emerged of leaked documents which suggest that HMRC is to introduce a requirement for online marketplaces to account for VAT on cross border sales of goods to UK consumers. This change, if enacted, is a significant extension to the current UK rules which provide that in some circumstances the online marketplace could have joint and several liability for VAT due on sales. A report in the Financial Times states that this will come into effect on 1 January 2021. There has so far been no official confirmation from HMRC on this point.

These alleged proposals seem similar to those included in the EU’s new VAT rules for e-commerce, which are currently expected to come into force on 1 July 2021.

Under the current rules, non-EU vendors selling goods to EU consumers via online marketplaces are responsible for accounting for any VAT due. The EU plans to change this so that operators who use an online marketplace, platform, portal or similar electronic interface to facilitate a supply of goods from a non-EU business to a private consumer within the EU will be deemed to have received and supplied those goods themselves. This means that the operator of the online marketplace, rather than the vendor of the goods, must register for and account for VAT on their sale.

If the Brexit transition period ends as planned on 31 December 2020, the UK would not be obliged to introduce the EU’s proposals. However, despite its departure from the EU, it is not surprising that the UK would consider introducing a similar scheme. According to the Financial Times report, HMRC has confirmed that it is informally consulting and listening to views from customs experts and VAT practitioners on how to address tax losses due to non-compliance abroad. HMRC does not appear to have mentioned specific proposals involving VAT rules for online marketplaces in this statement. 

Should the reports prove to be correct, an implementation date of 1 January 2021 would pose a major headache for UK operators of online marketplaces, which are also dealing with the challenges of operating during the coronavirus pandemic and preparing for systems changes as a result of Brexit. The European Commission has recognised the impact of the coronavirus emergency on preparations and has already proposed a six-month extension for EU businesses from its original start date of 1 January 2021. Will the UK do the same?

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