Tax clampdown leads to spike in VAT registrations

Oliver Gill
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The government says the new laws will give a sizeable boost to the public purse (Source: Getty)

The number of online retailers registering for UK VAT has increased tenfold after the taxman introduced new powers to crackdown on a £1bn loophole used by overseas traders.

In rules announced in March and coming into force in September, HM Revenue & Customs (HMRC) can force overseas retailers using UK online marketplaces to either appoint a UK-based VAT representative or provide a financial guarantee.

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Failure to comply by the overseas retailer means the taxman can pursue the UK-based marketplace for unpaid VAT.

And since the crackdown was announced 7,185 internet retailers have applied for a VAT registered. This compares with the 695 register in 2015.

The rule changes were made in response to the growth of overseas retailers not charging VAT on goods sold through online marketplaces. HMRC estimated such a practice was costing the exchequer around £1bn each year.

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Treasury financial secretary Jane Ellison said:

Having worked in the retail sector, I know what an important time of year this is for retailers and the millions of workers across the country who work in the sector.

These new powers will mean that everyone has to play by the same rules and pay the right tax.

The government said it hoped the new powers will raise £875m in total for the exchequer by 2021.

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