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HMRC Investigates Foreign Traders Attempting to Circumvent UK VAT Regulations

The UK tax authority, HMRC, is reaching out to around 12,000 businesses suspected of being foreign entities incorporated in the UK, potentially to dodge VAT on their UK sales. Online marketplaces like Amazon, eBay, and Etsy have been tasked with collecting VAT on sales by foreign traders since a legal change in January 2021. However, there are challenges as some traders are incorporating in the UK without a genuine presence, skirting the rules.

In response, HMRC is sending "one-to-many" letters to businesses believed to be Non-Established Taxable Persons (NETPs), giving them a chance to confirm or dispute their NETP status. NET status means that online marketplaces must collect and remit VAT directly to HMRC for the business' supplies. NETPs must register for VAT regardless of turnover, and if businesses dispute their status, they have 30 days to provide evidence of a UK establishment.

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