MPs report on marketplaces VAT fraud by overseas sellers
The House of Commons Public Accounts Committee has just published its report into online marketplaces VAT fraud. It’s based on a series of hearings held earlier in the year and written submissions from interested parties. We wrote about the process and evidence last month: eBay and Amazon account for VAT fraud to Public Accounts Committee.
You can download and digest the full report here. But here the major points and recommendations.
“HMRC’s estimate of the impact of online VAT fraud is out of date and flawed.”
The committee believes that HMRC’s estimate, based on 2015-16 that lost VAT revenue due to online fraud totals to something like £1bn to £1.5bn is not realistic largely because the speedy growth of online selling. The PAC has ordered HMRC to come up with a new assessment of what it could be costing the exchequer in lost revenues and also assess the wider impact of the practice. For instance, how is the competitive advantage of not charging VAT impacting on legitimate VAT compliant online sellers.
“HMRC has been slow to get to grips with the problem and is not yet doing enough to tackle it.”
The report is critical of HMRC and notes that no prosecutions have yet been made but also acknowledges that even with the new powers they were granted in the 2016 Finance Act, they do also need more powers what is a complicated situation. Possible future solutions include making the marketplaces liable for VAT collection and the introduction of “split payments” but the report acknowledge that neither are likely to be implemented any time soon.
“Online marketplaces and HMRC are not doing enough to work together to tackle the problem, and online marketplaces continue to earn their commissions and therefore profit from people who are defrauding the British taxpayer.”
The committee expressed concern that whilst there had been some productive cooperation more was required, they recommend: “HMRC should, by March 2018, put in place an agreement, applicable across the whole online marketplace, that sets out the collaborative working arrangements between HMRC and the online marketplaces, including details of co-operation, data sharing and expectations of a prompt response to evidence of non-compliance. is should include a requirement for all online marketplaces to ensure that a valid VAT number is showing for any non-EU trader selling goods to customers in the UK, where those goods are already in the UK. In the absence of a legal requirement to do so we would expect online marketplaces to implement this measure voluntarily.”
HMRC Should set collection targets and keep the PAC informed of progress
In its submission HMRC said it expected to collect an incremental £50m from its crackdown and by using the existing and new powers. Whilst VAT registrations had jumped considerably, they want HMRC to report back with collection and registration targets next March.
HMRC does not know how many fulfilment houses are in the UK and is therefore unable to systematically target the most blatant route for online VAT tax evasion.
The reports notes that the most agregious related practice was where goods were being held in UK based fulfilment houses and VAT was not being paid. The report notes that this an opportunity and HMRC needs to make an assessment of that industry and the role it can play. We’ve discussed that in another post here.
Will Brexit exacerbate the problem?
The committee expressed its concern in the report that Brexit could well make the problem worse and it pledges to monitor the issue as more information about the Brexit deal emerge. We’ve written about this in another post here.
All this requires work. Government jobs are for pass through time and snoozing.
Why rock the boat now.
Seeing as HMRC has got rid of a lot of their staff just how does the Public Accounts Committee expect them to do all this. It won’t happen or all that will happen is the remaining staff, who actually do the work, will have even more pressure put onto them from their managers.
Amazon and eBay will not pay one blind bit of notice as long as the Fees keep rolling in and they avoid paying out any tax on the profits their end in the countries they make them also.
“Amazon and eBay will not pay one blind bit of notice as long as the Fees keep rolling in”
So true sam. TBH I have found Amazon to be A1 to deal with, both as a company & CS, with Amazon CS being one of the best, BUT given its size? (much like eBay) must make them feel Teflon coated.
I think HMRC consider a special tax way for these type big companies.
Revenue based tax only way to get tax from this companies. They are wizards of Profit based tax systems. They have to pay tax like percent of their annual revenue.
Amazon just fined 250m Euro for e-book VAT’s by EU.
This companies have to regulate by the goverment very strictly not only for tax purposes. They are very rude to their sellers (kind of mobbing) .
If you are a seller on these marketplaces, you are a slave, no right to defend you.
Should just change the law and collect all VAT payments at source, for all sellers and it stop this non-sense at once. Instead more reports and voluntary disclosurer and another committee meeting in two years time which will say that the problem still exists but it’s actually alot bigger then we thougth when we last looked at this two years ago.