UK VAT on marketplace sales
The First-tier Tribunal has ruled that a UK-established seller remains liable for UK output VAT on sales made through Amazon, even where Amazon incorrectly treated the seller as a Non-Established Taxable Person (NETP) and accounted for the VAT itself.
In HBS Enterprises Ltd v HMRC, the Tribunal confirmed that the legal liability to account for VAT rests with the supplier under the VAT legislation. Amazon's mistake did not transfer that liability. As a result, HMRC was entitled to assess the seller for the VAT due.
The Tribunal also rejected the taxpayer's argument that this resulted in unfair "double taxation". It held that while VAT may have been paid by Amazon in error, the correct remedy is for the seller to recover those amounts from the marketplace rather than from HMRC.
Key Takeaway
Businesses selling through online marketplaces should regularly review how their VAT is being treated. An incorrect marketplace classification can result in:
Liability to account for VAT a second time;
Interest on underpaid VAT; and
Potential penalties.
Early identification of errors is essential, as recovering VAT incorrectly accounted for by a marketplace can be complex and time-consuming.
This decision is a timely reminder that businesses remain responsible for ensuring the VAT treatment of their sales is correct, even where a marketplace is involved.