Changes to VAT treatment of overseas goods sold to customers from 1 January 2021

HMRC have just announced Online marketplaces (OMPs), where they are involved in facilitating the sale, will be responsible for collecting and accounting for the VAT from 1st January 2021

See full announcement here

After first bringing the issue into the public eye with a successful press campaign in October of 2015 that led to the Panorama Program The Billion Pound VAT Scam  RAVAS and VATfraud.org have spent five years campaigning and lobbying tirelessly in Westminster to fix the glaring hole in the VAT system that has been exploited by overseas sellers for two decades.

With the help of MPs  and Lords  the issue was brought to the attention of The Treasury and now online marketplaces are to be made to collect and remit VAT. This is a giant step forward and one that UK businesses should welcome.

There are however  a number of concerns relating to enforcement and these new rules will not be effective if those who breach them do not suffer the confiscation of their stock. It is also unclear how the rules will play out with Online Marketplaces who have no UK presence at all but even so gaming the VAT system appears to have become much harder. 

HMRC has recently reached out to RAVAS and VATFraud.org and we are feeding back comments on the legislation with the hope that any potential loopholes can be spotted. 

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RAVAS was formed in 2010 in order to campaign for the ending of the abuse of an import VAT Exemption called LVCR which was being used by retailers to avoid charging VAT on mail order goods. RAVAS has already taken effective action against the abuse of LVCR in the Channel Islands (who are outside the EU for VAT purposes) by complaining to the EU Commission. The RAVAS complaint resulted in the exclusion of Channel Island mail order goods from LVCR and the clarification that member states are obligated to prevent LVCR from being abused for VAT avoidance purposes. RAVAS supported HMRC in a major court hearing in London in March 2012 where the Channel Islands abuse of LVCR was examined. The UK was given permission by the court to selectively exclude mail order goods from LVCR and this not only ended the Channel Islands offshore fulfilment industry but also clarified the right of member states of the EU to remove goods from LVCR selectively in order to prevent abuse and VAT avoidance.

Despite this positive result the abuse of LVCR is far from over and RAVAS is now campaigning to highlight the fact that:

  • The abuse of LVCR continues from other non-EU locations and this needs to be dealt with by the UK Authorities and the European Commission with a combination of enforcement action, effective policing and legislative change.
  • EU LVCR and VAT legislation relating to cross border mail order supplies is archaic and needs updating urgently