The UK Exchequer loses an estimated £1.5bn to import fraud each year. In order to tackle this, there are now measures to shift the liability for this fraud onto parties who facilitate the fraud by providing trading platforms in the UK. These businesses will now act to ensure that suitable due-diligence procedures are implemented in the supply chain.

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Summary
The UK Exchequer loses
an estimated £1.5bn to
import fraud each year. In
order to tackle this, there
are now measures to shift
the liability for this fraud
onto parties who facilitate
the fraud by providing
trading platforms in the
UK. These businesses will
now act to ensure that
suitable due-diligence
procedures are
implemented in the supply
chain.
24 May 2016
New VAT and 'fulfilment house' measures
Following the announcement in the March 2016 budget, the Government plans to
implement the budget measures aimed at reducing VAT fraud in the supply chain.
What is the issue?
An estimated £1.5bn of UK VAT is lost to fraud committed through online trading. In a
typical scenario, an overseas seller will import goods from the Far-East but will under-
declare the customs value and will abuse customs facilitation schemes such as Onward
Supply Relief, Low Value Consignment Relief and the Postal Imports scheme to achieve
customs clearance. Once cleared, the goods are then sold on an online marketplace
website, but without UK VAT being charged. This represents a loss to The Treasury, and
undermines legitimate trade.
What are the measures?
To combat this type of fraud, HMRC is to introduce new measures:
• Measure 1 – HMRC to require an overseas trader selling goods in the UK
through an online marketplace to appoint a UK VAT representative, who has
joint and several liability for the VAT due in the UK.
• Measure 2 –HMRC to make the online marketplace (ie the internet platform)
jointly and severally liable for VAT owed by overseas traders selling on its
platform.
• Measure 3 – HMRC is consulting on the Fulfilment House Due-Diligence
Scheme (FHDDS). This will require all persons who fulfil orders for overseas
suppliers with imported stock to register, and to ensure that appropriate due-
diligence procedures are in place to ensure the correct VAT is paid. This
measure is aimed at disrupting the speed of delivery for illegal traders.
What do you need to do?
Measures 1 and 2 are aimed at both traders and online marketplaces. Both powers are
discretionary, but we expect the compliance burden for all online traders to rise. Due-
diligence procedures should be implemented to demonstrate compliance. Measure 3 is
aimed at anyone who holds imported, duty paid goods in the UK to fulfil online orders. If
you operate what could be considered a fulfilment house, you may wish to submit a
response to the consultation, by the deadline of 30 June.
If you are affected by any of these changes, please contact your usual Grant Thornton
contact or one of the specialists below for more information.
Measures to combat online marketplace VAT fraud
Budget Alert - update
Contact
Ian Worth Customs Associate Director Ian.Worth@uk.gt.com (0)207 728 2174
Ben Price Customs Manager Ben.D.Price@uk.gt.com (0)207 728 3426
Karen Robb Indirect Tax Partner Karen.Robb@uk.gt.com (0)207 728 2556