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Tax evasion by online retailers is becoming an increasing concern for HMRC. Many fraudulent companies based overseas have found to be illegally selling and shipping products without the correct VAT or duty payments being made, and online tax evasion in the UK is just as common.

Marketplace platforms such as Ebay and Amazon are home to a large number of these illegal cases of online VAT evasion and duty-dodging, meaning that these sites are becoming more intensely policed and new laws have recently come into effect.

If you are concerned that you may soon be investigated for online tax evasion, the first step you need to take is to make contact with legal professionals as soon as possible.

It’s important that you provide them with as much information about your actions as an online seller as you can. They can then help you to collect evidence and build a defence to prove either that any accusations of online tax evasion made against you are false, or that any omissions you have made regarding the payment of VAT or customs duties were the result of an honest mistake that can be rectified without criminal proceedings taking place.

What Happens During an Investigation into Online Tax Evasion in the UK?

You will receive correspondence notifying you of any official investigation that is to take place. HMRC may request further information or clarification regarding the payment of VAT or duties on any products you import or export, and you are usually given 30 days to respond to these requests before they take further action.

You may also be invited to attend interviews with HMRC staff regarding any activity that has made them suspicious that you are guilty of online tax evasion or the omission of payment of duty. It’s highly recommended that your solicitors look over any correspondence of this kind that you have with HMRC, and attend any meetings alongside you in order to provide proper representation and assistance.

Financial penalties for tax evasion by online retailers depend on the amount of VAT and duty that was fraudulently avoided, and the extent to which the perpetrators went to conceal fraudulent behaviour. A case of this kind may be tried in either the Magistrate’s Court or Crown Court, and a maximum custodial sentence of 7 years is possible.

What is the Government’s Approach to Online Tax Evasion?

Under new legislation passed in Spring 2018, HMRC can now make overseas retailers register for VAT in the UK, or have them appoint a UK-based VAT representative. Even before these rules came into force, the HMRC crackdown into online tax evasion in the UK was having a positive effect; 7,185 internet retailers registered for VAT in 2016, compared to just 695 in 2015.

In mid-2018, the Fulfillment House Due Diligence Scheme was introduced, which encourages companies storing goods that are imported from outside the EU to complete a series of checks to ensure that all legal processes have been adhered to. Tax evasion on marketplaces such as Amazon and ebay was also made the subject of new legislation, with sites such as Amazon and ebay being required to take responsibility for all sellers using their platform and to ensure that each one pays the correct tax and does not commit fraud.

How Can I Avoid Investigations for Online Tax Evasion?

The best approach you can take in order to prevent your online business from becoming the subject of a HMRC investigation is to sign up to the aforementioned Fulfillment House Due Diligence Scheme if your company deals in or stores goods that come from outside the EU, and to set up proper processes and checks to ensure that correct tax is being paid by your company of all times.

It’s vital to keep detailed records of these checks to provide as evidence to HMRC if necessary. Your legal advisor should be able to advise you on how to do this.

Contacting a solicitor as soon as you learn of any investigation against you into allegations of online VAT evasion or duty dodging is the best way to ensure that justice is achieved. A legal specialist may also be able to advise you in the set-up of processes that will ensure all tax is paid correctly in the future in order to avoid further problems with HMRC.

If you’re worried about a possible future HMRC investigation into your online business, simply contact DPP Business & Tax today. Our specialist legal advisors have more than 20 years of experience in defending clients accused of tax-related offences and financial fraud, so we’ll be able to answer all your questions fully and provide you with the support and representation you require.