Many overseas online traders are still not paying VAT on the goods they sell despite government efforts to force them to do so and the situation may get worse in the wake of Brexit, according to MPs
The House of Commons Public Accounts Committee (PAC) today said that ‘too many traders are still not paying their fair share’ of VAT and that British-based businesses were suffering as a result.
Committee members reported last year that overseas competitors not charging VAT when selling in the UK through online trading platforms and that the Exchequer was losing between £1bn and £1.5bn a year as a result.
‘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,’ they urged.
HMRC has since taken action and over 27,000 new traders have become VAT registered in the last two years.
However, the Committee says that HMRC still has ‘a lot to do’ to identify non-compliant 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 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 (eg, 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,’ say Committee members.
They say that 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.
‘If HMRC is to make good on its forecast of an additional £1bn in VAT revenue by 2023 then it must build on the progress made so far. This will be no simple task given the challenges facing the Department as the UK prepares to leave the EU,’ said Committee chair Meg Hillier. ‘But it is a task that must be tackled in tandem with work required for Brexit—itself a cause of additional uncertainty for honest British traders facing unfair competition from businesses that fail to pay their fair share of VAT.
Those traders need to know HMRC is on their side and prepared to take the fight to the fraudsters. The Department must not take its eye off the ball.’
Report by Rob Munro
