HMRC has been told to strengthen its efforts to tackle VAT fraud by online traders. The Public Accounts Committee says “too many” are not paying their “fair share” and that this is hitting UK business.
PAC members have highlighted the issue of overseas competitors not charging VAT when selling in the UK through online trading platforms. They say about £1 billion to and £1.5 billion in tax revenue is being lost annually.”
Level playing field
“HMRC must do all it can to give UK businesses that play by the rules the level playing field they are entitled to and give out a clear message that the UK is not a soft touch for VAT fraudsters,” says the PAC.
It adds: “HMRC has taken some positive steps to tackle online VAT fraud. But there remains much to do to embed new compliance measures and to ensure online marketplaces and sellers meet their VAT obligations fully.
“Since we last reported on online VAT fraud, in October 2017, several new measures have become available to HMRC to tackle online VAT fraud. HMRC now has extended powers to hold online marketplaces jointly and severally liable for the unpaid VAT of a business, arising from sales via that online marketplace. Online marketplaces are now required to display a VAT number for their traders, when they are provided with one.
Thoroughly vetted
“There have been 27,500 applications to register for VAT from overseas online retail businesses since the new measures were announced. But this is a large pool and will need to be thoroughly vetted. HMRC has increased staff numbers working on this area but this is a big task.
“With the help of these additional measures HMRC expects to raise an extra £1 billion VAT revenue by 2023. We expect HMRC to implement the new measures robustly in its efforts to secure this revenue.”
At present HMRC has the powers to seize the UK assets of those suspected of VAT. In reality this doesn’t happen because it is not “cost effective”.
Non-compliant overseas traders
HMRC should update us by March 2019 on progress in securing the additional forecast £1 billion VAT revenue through to 2023, including progress and outcomes on investigating non-compliant overseas traders, auditing the compliance of newly registered traders and their repayment of previously unpaid VAT.
“HMRC is considering, with the ministry of justice, whether its seizure powers meet its needs or should be strengthened, or whether it could agree a streamlined set of powers.”
The committee adds: “HMRC is consulting on a new way to collect VAT, known as split payment. This would allow the VAT to be extracted from online payments in real time.
“The department believes this could significantly reduce the challenge of enforcing online seller compliance. However, even if this were an appropriate method, introduction of split payment is some way off.”
We look forward to the update.