HMRC require proof of UK establishment from VAT-registered businesses at high-volume addresses

13 October 2023| CATEGORIES: e-Commerce, high-volume addresses, HMRC campaign| TAGS: e-commerce, NETPs, online marketplace rules

The use of high-volume addresses as the principal place of business has increased in recent years. Businesses registered for VAT at a high-volume address will be asked by HMRC to prove they are established in the UK.

Many of these addresses are being used by overseas established business and are potentially being used by some traders to avoid being treated as a Non-Established Taxable Person (NETP) by online marketplaces.

As a result, some online marketplaces are not collecting and paying the VAT due on behalf of the trader. This gives these NETPs a competitive advantage, particularly against genuine UK businesses.

Why is this as issue?

In January 2021, the law changed making online marketplaces liable for the VAT on sales made by overseas traders on their platforms. HMRC believes that some NETPs who have incorporated in the UK and provided UK address details to marketplaces, have avoided the marketplace liability rules.

Where this happens, the NETP can fail to declare the VAT without the marketplace becoming liable. This gives the NETP a competitive advantage compared to genuine UK businesses.

What is a high-volume address?

In recent years, HMRC has seen an increase in the use of “high-volume addresses”. A high-volume address is where a single UK address is listed as the principal place of business for many VAT-registered businesses. It has been reported that in some cases, more than 10,000 businesses have been registered at a single UK address.

To combat this, HMRC is now writing to VAT registered businesses that are registered at high-volume addresses to ask for evidence to prove the business is established in the UK for VAT purposes. If the business does not respond, HMRC will consider the business to be non-established for VAT purposes.

Action required by businesses that are genuinely established in the UK

Genuine UK businesses that receive the letter will need to send evidence to HMRC to show they are established in the UK. Details of what evidence can be provided will be included in the letter.

Businesses that receive this letter can respond directly to HMRC or ask an authorised agent to do so on their behalf.

Businesses that are not established in the UK for VAT purposes do not need to respond to the letter.

Determining UK establishment

Details on the rules of establishment for UK VAT purposes can be found in VAT Notice 741A.