- E-commerce allows offshore businesses to trade in the UK without much presence in the country, potentially avoiding tax obligations.
- The government has taken measures to combat VAT evasion by offshore businesses claiming to be UK-based for VAT registration.
- HMRC is now sending letters to UK VAT-registered businesses, requiring evidence of UK establishment or else they will be treated as non-established, affecting their liability for sales made through online marketplaces.
- This may complicate matters for legitimate businesses and is seen as a temporary measure before the new operating platform reporting rules come into effect.
- These rules will require online marketplaces to conduct due diligence on sellers and report their activity to HMRC, aiming to make VAT evasion more difficult.