06/12/2017
Combating VAT fraud by overseas online sellers (UK)
A ‘split payment’ method, where Vat is extracted from online payments in real time and deposited with the tax authority, remains the best option in HM Revenue & Customs’ view for stemming losses in Vat revenue resulting from non-compliance by some overseas sellers trading online, despite the associated issues and complexities highlighted by respondents to a call for evidence in March *.
While stakeholders pointed out the problems, the summary of responses to the HMRC consultation set out in ‘VAT: Tackling fraud on goods sold online – update on split payment’ also reveals broad agreement that – despite the challenges – a split payment method of tackling the losses is feasible.
HMRC estimated that between £1bn-£1.5bn of Vat was lost in 2015-16 from businesses selling goods – often routinely stored in the UK – to UK consumers via online marketplaces without charging Vat. The UK government has also recognised that a split payment model could transform the collection of Vat more broadly in the future.
HMRC has identified potential options for a split payment model employing payment technology to extract the Vat. It is currently conducting research with UK consumers in order to understand in greater depth the context of online shopping channels and any potential changes split payment may create.
It plans to extend this research to overseas and UK sellers to inform the model development process, while continuing to test developments through internal evaluation and ongoing engagement with the payment sector and marketplaces. Collaborative workshop-style sessions are tentatively planned for early 2018.
In the meantime, new measures announced at Budget 2016 have strengthened HMRC’s powers to tackle the issue by
- enabling it to direct overseas businesses to appoint a tax representative in the UK
- making online marketplaces jointly and severally liable for the Vat of overseas businesses who do not comply with UK Vat rules
In addition, the Fulfilment House Due Diligence Scheme (FHDDS) will open for registration on April 1st 2018.
* ‘Extracting Vat at Point of Online Purchase (UK)’, CPA News, 23 March 2017.
The Credit Protection Association is a credit management company established in 1914. If you supply goods or services on credit then we can help you!
Keep up to date with the latest news by following us on social media:-
Watch the video to find out how CPA can help you!
Please call us on 0330 053 9263 to discuss how CPA can help your cashflow. Alternatively, either email us or use our contact form.