Recommendation 8

In January 2021 government introduced legislation making online marketplaces liable for VAT from overseas sellers, resulting in £1.5 billion of additional tax a year. This is five times greater than HMRC estimated at the time.15 We asked HMRC why this was, and it explained that the volume of online sales had increased but also that it had imperfect information at the time.16 However, HMRC conceded that it had not sought to break down which of these factors contributed most to the difference.17 HMRC also told us it thinks it has a good idea of how much non–compliance there is in the online retail sector.18