Brighton, UK (PRWEB UK) 21 March 2013
Accordance, the VAT consultancy which specialises in VAT related to the e-commerce industry, has joined IMRG, the industry association for online retail. IMRG supports the development of e-commerce strategy; promotes best practise within the industry and aims to maximise the profitability of its members businesses by making sure its members are fully aware of both the UK and international markets; and put members in touch with relevant solution providers which can help nurture their business to enable them to expand into new territories.
The UK boasts a £78 billion stake in the world’s global e-commerce market which is expanding approximately 11% year on year and one third of all European cross-border trade goes through UK retailers. Companies of all sizes are taking advantage of the potential of the internet to reach into new markets and extend their sales territories beyond the country in which they are established. E-commerce is enabling businesses to reach millions of new international customers.
“The increase in online retail is great news for businesses; but, it’s extremely important to make sure that VAT registration and reporting obligations are fulfilled as part of the process of making sales,” says Andy Spencer, Accordance’s Head of Consulting. “If your company sells goods cross-border to non-business customers via the internet or mail order then you could be making ‘distance sales’ for VAT purposes and may have to register for, and report, VAT in a number of EU Member States.”
European VAT distance selling regulations require companies to register for VAT as non-resident traders in each country, where they exceed distance selling thresholds. Once registered, the company is then required to charge local VAT and submit VAT Returns. However, given the administrative and technical burden of assessing when thresholds are breached, managing overseas VAT Registrations and related VAT reporting obligations, many companies fail to stay compliant with regulations. What is more, many of these companies fail to see the importance of registering for VAT in each country in which they breach thresholds, as long as they are paying the VAT somewhere.
Overseas tax authorities are increasingly monitoring distance selling sales and taking an interest in distance sellers, specifically in respect of whether they have retrospectively exceeded the distance selling thresholds in other Member States. HMRC is also working with the overseas tax authorities under mutual assistance. This would raise the chances of other tax authorities becoming aware of UK companies exceeding thresholds in other countries. For example if HMRC identifies that thresholds have been exceeded in other countries, there is a risk that they will send this information to the tax authorities in other countries.
If a business does not register from the correct time and the tax authorities subsequently identify a retrospective issue, there could be an impact on how the tax authorities view the failure to account and the penalties that they will apply. And it appears that the probability of the relevant authority finding out a companies’ discrepancy is getting significantly higher, the more harmonious the EU tax authorities become.
“International trade is increasingly important to online retail; to avoid possible fines and penalties when trading cross-border, it is important that businesses are aware of and comply with relevant VAT obligations across the countries where their customers are based,” says Andy Spencer. “Although some areas of VAT treatment for online retailers are common to all Member States within the European Union, many practical aspects differ between countries.”
He continues: “Often e-commerce companies aren’t aware of possible tax risks they face for failure to register for VAT when they breach distance selling thresholds. If the correct VAT isn’t charged to clients and paid to the appropriate tax authority, penalties and interest may be imposed; penalties for non-payment vary between 5% - 300% of the VAT due, and are usually dependent upon whether the business voluntarily declares their VAT position on his own initiative before any action is taken by the VAT authorities.”
Notes to editors:
- Accordance is a unified VAT Compliance and Consulting practice, with a focus on cross-border transactions.
- The company provides practical, commercially beneficial VAT assistance to blue-chip companies across the EU and beyond.
- Accordance assists a full spectrum of international businesses better manage cross-border VAT costs.
- The company reaches across Europe, but manages all work from an accessible and responsive hub in the UK.
- Accordance often works with accountants, acting as an ‘outsourced VAT department’ for their clients.
- The Accordance team includes senior ex-Big 4 VAT personnel, expert European VAT Compliance management, VAT legal specialists, Customs and Duty Experts and VAT savings experts.