Coming into effect from September 2022, HMRC have announced that they will be changing the way they carry out VAT assessments for overseas traders who do their trading through online marketplaces.
Normally, when HMRC obtains information which indicates an inaccurate VAT return, they send a request to the taxpayer for further information. However, when these new changes come into place HMRC will no longer send out these requests and will simply issue a VAT assessment.
HMRC have explained that because they believe that the information, they hold is correct and accurate, they do not require taxpayers to send in the same details. The assessments will be sent to the overseas taxpayers registered UK address.
These VAT assessments will cover any VAT returns for the period up to December 2020 and will be subject to the usual statutory review and appeals process. Taxpayers who receive a VAT assessment letter will be able to inform HMRC if they think that HMRC holds the wrong information or be able to provide further information.
If it is established that the assessment is valid, taxpayers are able to set up a time to pay arrangement with HMRC if they have difficulty paying the assessment. Failure to pay or to agree a time to pay arrangement will result in HMRC approaching the online marketplace for the debt (as a result of the new joint and several liability rules in place from 1 January 2021).
What impact will this have?
Online marketplaces may start implementing certain protection measures to mitigate the exposure they have for being liable to taxpayers VAT debts. This could include preventing the overseas trader from using the online marketplace if they have received an assessment letter and have failed to settle the debt, thus resulting in loss of revenue for the trader.
We would recommend ensuring that all VAT returns are submitted correctly and accurately. If at any point an error is identified, steps should be taken to correct the position before receiving an assessment, to avoid any penalties.