23/03/2017.
How payment technology could be applied in a ‘split payment’ model that would extract Vat at the point of purchase of goods bought online and remove unfair advantages enjoyed by overseas sellers who are not UK Vat registered, is the focus of a call for evidence published by HM Revenue & Customs.
The large increase in online shopping has resulted in more and more goods from overseas sellers being routinely stored in the UK – often in ‘fulfilment houses’ – in the interests of rapid delivery to UK consumers.
Vat split payment would increase tax efficiency for businesses and HMRC as well as helping to tackle three situations that exacerbate non-compliance by overseas suppliers, which cost the UK an estimated £1-1.5 billion of lost Vat in 2015/16.
1) Businesses based overseas but obliged to register and pay Vat in the UK.
2) The time lag between the consumer paying for goods and the business remitting the Vat element to HMRC.
3) Where the Vat is paid by a UK customer to an overseas business which may – or may not – pay it over to HMRC in due course.
‘VAT: Tackling fraud on goods sold online – update on split payment’* suggests the following principles should inform the discussion on the design of the Vat split payment model, which should
- be initiated at a point in the payment cycle by one of the participants and be driven by payment technology
- be invisible to the UK consumer, who will continue to pay by whichever method the consumer chooses, for example credit or debit card or by using a payment service provider
- not affect UK consumers’ rights
- create significantly less opportunity for fraud as the Vat will be extracted in real time in the payment cycle and later deposited with HMRC
- be proportionate and fair