As we have heard from the hon. Member for Salford and Eccles, the clauses make changes to ensure that the high street and online businesses that pay UK VAT can compete on a level playing field with overseas sellers that, on occasion, do not. The clauses will ensure that more VAT is paid by overseas sellers who store their goods in UK fulfilment houses and sell those goods via online marketplaces, will give HMRC stronger powers to make overseas business appoint a UK tax representative, and will ensure that online marketplaces are part of the solution to the problem. The measures are forecast to reduce VAT evasion and raise £875 million in extra tax over the next five years, as certified by the independent Office for Budget Responsibility.

A recent survey by the British Retail Consortium shows that more than 20% of non-food retail spending now occurs online, which means that the UK public can now buy goods faster and cheaper than ever before. British businesses also have an online platform to enter markets they could normally never have imagined. A small village business can now supply high-quality local goods across the United Kingdom and even the world. However, that small business is competing with thousands of online sellers overseas, some of which are evading VAT. That abuse has grown significantly and now costs the UK taxpayer between £1 billion and £1.5 billion per year. Those overseas sellers are competing with all businesses trading in the UK, abusing the trust of UK consumers and depriving the Exchequer of significant revenue.

The Government are responding to that problem. An HMRC national taskforce is carrying out operational activity jointly with law enforcement agencies, which is actively disrupting the supply chains used by overseas businesses to evade VAT and has resulted in the seizure of more than £750,000-worth of illegal goods over the past year. However, HMRC’s traditional powers are difficult to apply against those businesses, which is why the Government are acting to strengthen HMRC’s powers in that area. Our first legislative step in the Bill focuses on those non-compliant overseas businesses themselves and the online marketplaces they trade through. We are strengthening HMRC’s ability to require non-compliant overseas sellers to appoint a UK VAT representative to provide support. We are also introducing a new joint and several liability provision that will allow HMRC to make those online marketplaces ultimately responsible for any unpaid VAT.

Our second legislative step is a new due diligence scheme for fulfilment houses. Those are often large warehouses in which overseas businesses store goods in the UK before sale. The Government will ensure fulfilment houses perform proper due diligence on the overseas businesses using them and on the goods handled on their behalf. HMRC is currently consulting on the detail in preparation for legislation in next year’s Finance Bill.

Turning back to the measures we are legislating for in the Bill, I will explain the changes made by these clauses. Clause 112 makes changes to the existing rules that allow HMRC to direct an overseas business to appoint a VAT representative with joint and several liability. The changes will ensure that the VAT representative is actually in the UK and is accessible to HMRC for operational activity. That will make it much easier for HMRC to pursue the debts of non-compliant overseas businesses. The clause also gives HMRC greater flexibility to seek a security.

The changes introduced by clause 113 will ensure that if overseas businesses fail to appoint a UK VAT representative or continue to evade VAT, the online marketplace that they trade in can be made liable for that VAT. In such circumstances, HMRC will put an online marketplace on notice that it will be held jointly and severally liable for an overseas business’s VAT. That notice will set a period of time during which the online marketplace can avoid being liable for the VAT, either by securing compliance from the overseas business or by preventing that business from trading through its platform. If the online marketplace does neither, it will become liable for that VAT and will become accountable for the overseas businesses it hosts on its site. The new measures are aimed at the overseas businesses themselves but will also bring the online marketplaces into play. Those sites have an important role in that market and will bolster HMRC’s ability to tackle that evasion.

In closing—I will come to the hon. Lady’s questions in a moment—I thank my hon. Friend Chris Heaton-Harris, whose campaigning on this issue rightly held the Government to account; the small businessmen and women of the UK have a worthy champion in this place. The hon. Member for Salford and Eccles reasonably requested that we do not target legitimate companies. I assure her that HMRC will take a risk-based approach to implementing the measures on a case-by-case basis. She also raised the concern that VAT may be lost before HMRC is able to take action. Let me reassure her that HMRC will act swiftly, taking a risk-based, case-by-case approach. From Royal Assent, action will be taken. For the purposes of yield, these measures score from 2017-18, but HMRC is keen to take action.

The hon. Lady asked how HMRC will enforce the VAT due from online marketplaces. HMRC is working with relevant interested parties to ensure that these clauses are effective. If online marketplaces do not pay up, they will be subject to HMRC’s debt collection and enforcement processes.

On timing, it is important to remember that the suppliers, not the online marketplaces, have the primary responsibility to account for VAT. This package of measures will make it much more difficult for overseas businesses to avoid paying the tax they are liable for in the UK. If sellers continue to evade their liability and the online marketplaces do not act to prevent that, they will be held jointly and severally liable.

On the yield from these measures and how it was calculated, the costings were certified by the independent Office for Budget Responsibility. As I said earlier, £875 million has been scored over the next five years. On the issue of HMRC’s resources and its ability to deal with tax avoidance and evasion more widely, we have already announced that in this Parliament we will legislate for more than 25 measures on avoidance, evasion and aggressive tax planning, and they are forecast to raise £16 billion by 2021. We have also given HMRC an extra £800 million to fund additional work to tackle tax evasion and non-compliance by 2020-21.

We have to remember that the UK’s percentage tax gap is one of the lowest in the world; in 2009-10 it was 7.3%, and in the first four years of the previous Parliament it fell to 6.4%. That is not to say that there is not more to do. This measure is evidence of the need for further action. We have provided HMRC with the support it needs—powers and resources—and that will continue to be the case.

This type of tax evasion by overseas businesses is a major risk to the Exchequer, so it is right that we take action. This action will protect millions of UK businesses from unfair competition and protect the Exchequer. I welcome the cross-party support for clauses 112 and 113.