Internet shopping, particularly through online marketplaces like Amazon and eBay, is now commonplace. Online traders on those marketplaces should charge VAT on their sales in the same way that they would on goods bought over the counter. The VAT rules require that all traders based outside the European Union (EU), selling goods online to customers in the UK, should charge VAT if their goods are already in the UK at the point of sale. But too many are not still doing so. HM Revenue & Customs’ (HMRC’s) latest estimate is that online VAT fraud and error cost between £1 billion and £1.5 billion in lost tax revenue in 2016–17. VAT fraud has a wider impact on the market, and creates unfair competition; sellers who do not charge the VAT that they should are able to undercut the prices offered by law-abiding UK businesses by up to 20%, forcing many to lay off staff or even go out of business. We have raised concerns several times before about how slowly HMRC has responded to this problem, most recently in the Committee’s report in October 2017. Since then, several new HMRC compliance measures have come into effect: extended powers to hold online marketplaces jointly and severally liable for unpaid VAT of a business, arising from sales via that online marketplace; a requirement for online marketplaces to display a valid VAT number for their traders, when they are provided with one; a scheme to register fulfilment houses; and a Memorandum of Understanding to promote collaboration between HMRC and online marketplaces and greater sharing of information.
Published: 29 June 2018