UK VAT Guidance for Marketplaces Selling for Non-UK Sellers

The UK Government has published guidance for online marketplace operators who are liable for VAT on goods of any value when located in the UK at the point of sale and sold by a non-UK business through an online marketplace. The guidelines provide online marketplaces with practical steps to take and examples of checks they can perform to determine whether the online seller is based in the UK or abroad.

Main Steps for Determining Seller’s UK Establishment Status

The guidance published by the UK Government, written by HMRC, underlines that online marketplace operators must take all reasonable steps to determine the seller's place of establishment. As a consequence of failing to take these reasonable steps, the HMRC will take measures to assess any outstanding VAT.

The steps provided by HMRC, published by the UK government, are not mandatory and are not a definitive list, but rather illustrative examples of the checks that online marketplace operators might use to determine whether a seller is based in the UK or not. Therefore, it is up to operators to decide what checks are reasonable and appropriate in each situation. Factors that operators can use to make this decision include the size of the business, the internal risk assessment systems it employs, and the specific details of each transaction. 

One of the key measures is to keep records to demonstrate that reasonable steps have been taken to determine where the seller is established for VAT purposes. Although the HMRC does not specifically state which documents are needed, it may later request proof of the actions taken to identify the seller's place of establishment.

However, HMRC did underline that it will carefully examine the data used by operators to determine the seller’s place of establishment and evaluate actions taken to address any specific risks, considering whether those steps were suitable, sufficient, and carried out in a timely manner. Furthermore, HMRC will review the check's findings and assess whether the operators' response to those results was appropriate.

Some of the checks that operators might consider include verifying a UK principal place of business, checking VAT registration, verifying Companies House registration, and determining whether the seller’s directors reside in the UK. Reviewing financial and payment information, as well as looking for indicators of a UK presence, is another mechanism to consider.

Conclusion

Ultimately, online marketplace operators must exercise their judgment and apply due diligence tailored to their specific business and operational context. The guidance provided by HMRC highlights the importance of implementing a detailed Know Your Customer (KYC) procedure for third-party sellers.

Source: UK Government