HMRC performance: progress review

We reported in October last year that British business was being hit hard by overseas competitors not charging Value-Added Tax (VAT) when selling in the UK through online trading platforms. UK taxpayers have been losing between £1 billion and £1.5 billion a year from online VAT fraud. 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.

Since our report, HMRC has taken several steps to start tackling the problem and it is encouraging that over 27,000 new traders have become VAT registered in the last two years. However, HMRC still has a lot to do to check who these traders are and make sure it is collecting the right amount of VAT from them, as well as pursuing those who were already operating. We are concerned that too many traders are still not paying their fair share. We want to see that HMRC is rigorously checking compliance of newly registered overseas traders, that the Memorandum of Understanding on information sharing between HMRC and online marketplaces leads to worthwhile collaboration, that HMRC is looking at what further powers (e.g. to seize goods) would help it to enforce compliance, and that it is actively considering the pros and cons of other ways, such as collecting VAT directly at the point of sale (known as split payment), to address this problem. Concerns have also been raised by UK businesses about the future arrangements for VAT payments post-Brexit for goods entering the UK from the EU.

RAVAS and VATFraud have highlighted the potential negative implications for future VAT arrangements when the UK leaves the EU. This only adds to the many challenges HMRC faces as we leave the European Union.