Find out what VAT checks you must carry out on overseas sellers if you're an online marketplace operator, and what HMRC will do if you do not meet their requirements.
Legislation allows HMRC to hold you as the operator of the online marketplace jointly and severally liable for unpaid VAT where:
- an overseas seller operating on your marketplace should have registered for UK VAT and has failed to do so
- you knew or should have known that an overseas seller should be UK VAT registered
You can also be held jointly and severally liable if HMRC tells you that a seller operating on your marketplace is not meeting its VAT obligations.
When you must check that an overseas seller is registered for UK VAT
You must check that overseas sellers on your marketplace are registered for UK VAT if they are selling:
- goods to customers in Northern Ireland and the goods are located in Northern Ireland at the point of sale
- to other businesses who provide a valid VAT number and the goods are in the UK at the point of sale
Checks you need to make
It’s your responsibility to check when an overseas seller needs to be registered for UK VAT. If you fail to do this, you could be liable for any unpaid VAT.
If you believe an overseas seller should be paying UK VAT, you should check:
- that they have a valid VAT Registration Number (VRN)
- the location of the seller
- the location of the goods that will be sold by the seller
- if the seller, or those directing the seller, have been removed from your online marketplace before
- how quickly the seller is able to fulfil orders from UK customers
- how the seller fulfils orders from UK customers
- if there’s any information that the seller, HMRC or a third party gives you that might indicate dishonest conduct or failure to meet their VAT obligations
Tell HMRC when you identify and remove a seller who has not met their VAT obligations from your marketplace.
Checking the seller’s VAT Registration Number (VRN)
You should request a VRN when you think a seller offering goods for sale on your marketplace should be registered for UK VAT.
It’s up to you to validate the VRN of a seller operating on your marketplace within 10 days of receiving it.
You can check a UK VAT number. Registrations are updated every day.
VRN mismatches or discrepancies
If there are any differences in the name of the online seller on your database and the UK VAT number checker, you should treat it as a discrepancy.
If you identify a minor difference between the 2 databases, carry out further checks to confirm that the seller is not using another business’s VRN.
If the only difference is in a prefix or a suffix in the business name (for example, ‘Ltd’ rather than ‘Limited’), then it’s reasonable for you to decide that the VRN and the name shown on the UK VAT number checker accurately match with the business name on your database, if there are no other indicators that they are not meeting their VAT responsibilities.
If you identify a significant difference between the 2 databases (for example, if the name of the seller on your database is clearly different from the name of the VAT registered business on the UK VAT number checker, it’s reasonable for you to decide that the seller is not registered for VAT, and is using another business’s VRN. HMRC will consider a range of factors before deciding if you’ve correctly validated a VRN.
These will include if there was any information you held or you should have reasonably requested that would help you decide the seller should have registered for VAT.
If the seller has registered for VAT but has not received a VRN yet
Do not allow an overseas seller who must be registered for UK VAT to continue to trade on your marketplace if they do not have a VRN and they’re either:
- advertising or offering goods for sale
- trading on your marketplace and have not provided you with a valid VRN after 60 days of trading
You should suspend the seller’s account or remove it from your marketplace and tell them to contact the HMRC VAT helpline if this will cause them any problems.
VRN display and verification requirements
You must display a verified VRN on your website within 10 days of the seller giving it to you.
You do not have to display a verified VRN within 10 days if the seller gives it to you before they offer goods for sale on your online marketplace. In this case, the 10 day deadline is extended to the end of the day when the seller first offers goods for sale.
You should also take reasonable steps to remove any VRNs that are displayed on your online marketplace within 10 days of you becoming aware that they are not valid. If you do not do this, you could be liable to a penalty.
Check if the business is an overseas seller
HMRC defines a business as an overseas seller if they sell goods stored in the UK to UK customers and do not have a business establishment in the UK.
A seller is established in the country where the functions of their business’s central administration take place.
To work out where that is consider where:
- essential management decisions are made
- their registered office is located
- management meetings take place
Read chapters 9 to 13 of VAT Notice 700/1: should I be registered for VAT? to decide if a person has a business establishment or other fixed establishment in the UK related to any business they carry out.
Read the VAT registration section of the HMRC internal manual for more detailed guidance on what a non-established taxable person is.
How to decide the location of goods at the point of sale
You should normally be able to decide the location of goods at the point of sale or when goods are either offered or advertised for sale to UK customers on your marketplace from information that you already hold. This will include:
- if the goods are fulfilled by your own fulfilment houses in the UK, then information held by this part of your business
- information you have obtained from the overseas seller about the location of the goods
- information displayed by the overseas seller on your online marketplace
- your terms and conditions which may stipulate that the seller has to import the goods
Checking delivery speeds
You should have information about the speed of delivery of the goods. This might show that information given to you by an overseas seller about the location of the goods is wrong, as it would not be possible for it to deliver the goods from that location in the timeframe they’ve advertised.
We would expect you to ask the overseas seller for more information in these cases.
The ‘knew or should have known’ test for online marketplaces
HMRC may hold you jointly and severally liable for any unpaid VAT due on sales an overseas seller has made on your marketplace if you knew, or should have known, that an overseas seller offering goods for sale on your marketplace should have registered for UK VAT and has not.
You’ll be liable for the unpaid VAT if you have not stopped the overseas seller from offering goods for sale on your marketplace after 60 days from the date that you first knew or should have known.
You’ll continue to be liable until the overseas seller meets their VAT obligations.
How HMRC will apply the ‘knew or should have known’ test
We’ll consider a range of factors to decide if you knew or should have known that an overseas seller operating on your marketplace has not registered for UK VAT.
These will include:
- if there was any information you held or you should have reasonably requested that would help you decide the seller should have registered for VAT
- how much due diligence you’ve taken, including the checks you’ve made
We’ll contact you if we consider that you should be made liable for the overseas seller’s VAT.
HMRC notifications for sellers who fail to meet VAT requirements
Notification of joint and several liability for online marketplace operators
HMRC will issue you with a joint and several liability notice when it identifies any seller on your marketplace that is not meeting its VAT requirements.
You’ll then have a specified period (usually 30 days) to stop that seller from offering goods for sale to UK customers on your marketplace.
Any liability notice issued to you as an online marketplace operator will continue until either:
- it’s withdrawn by HMRC
- you tell HMRC you are no longer the operator of that online marketplace HMRC can withdraw the notice:
- if we’re satisfied the seller has fully met all its VAT obligations, and continues to do so
- where the seller is prevented from selling on the online marketplace and, after a sufficient period of time, HMRC is satisfied that they are no longer a significant risk
You will not be assessed for the seller’s VAT if you stop the seller from selling goods on your online marketplace within the time specified in your liability notice.
You also will not be assessed if HMRC is satisfied the seller using your online marketplace is fully meeting its UK VAT obligations.
Notification of the ‘knew or should have known’ test for overseas sellers
HMRC will send you a notification if they decide that the ‘knew or should have known’ test applies to you in relation to an overseas seller who was still selling goods, but failing to account for VAT, on your marketplace 60 days after you had enough knowledge to make that decision.
- explain why the ‘knew or should have known’ test applies
- tell you the amount of unpaid VAT that you’ve been made jointly and severally liable for
- send you a VAT assessment
How to challenge or appeal a HMRC decision
How to challenge a HMRC decision to make you liable for a seller’s VAT
If you do not agree with HMRC’s decision to assess you for the unpaid VAT of a seller operating on your marketplace you can:
- ask for the decision to be reconsidered by the assessing officer
- ask for an independent review
- appeal the assessment making you jointly and severally liable for the unpaid VAT of a seller operating on your marketplace
When you can appeal
There are some differences to the general appeals guidance on what to do if you disagree with a tax decision.
You can appeal against:
- a VAT assessment (including when you’re assessed for the unpaid VAT of a seller operating on your marketplace)
- HMRC imposing a VAT penalty
You cannot appeal against being issued with a liability notice.