AAT: Online platforms must collect and remit VAT

AAT has today called for online marketplaces, including Amazon, eBay and Etsy to be liable for VAT collection and remittance in the UK.

HMRC has estimated that VAT fraud on online marketplaces is estimated to cost the Exchequer between £1bn and £1.5bn a year.

Faced with increasing pressure to act, the Government introduced new rules in 2016, which have seen around 80,000 new firms register for VAT. However, there is little information about how many of these firms have subsequently submitted tax returns or paid the correct VAT due. In addition, many of these registrations are believed to be false, cloned or registered in someone else’s name.

To reduce online VAT fraud, AAT has urged the Government to make online platforms liable for VAT collection on all online transactions, as increasingly happens overseas.

There is already an EU regulation requiring the same but it does not come into force until January 2021 when the UK has left the EU. The EU regulation also only applies to transactions below €150 rather than all transactions as AAT suggests.

Adam Harper, AAT Director of Strategy and Professional Standards, said:

“The impact on the taxpayer is significant because billions are not being paid, that’s billions that cannot be invested in public services as a result.

“There is arguably an even bigger impact on the success of legitimate small businesses who sell online. This is because they are competing against fraudsters who can offer an unjustified and illegal 20% VAT saving.

“Other countries have successfully adopted this practice, with Australia, the US and New Zealand all having done so recently.

“The Government must stop relying on the changes it introduced in 2016; realise the need to take more effective action and require online platforms to collect and remit VAT on all transactions. If it doesn’t do so, the UK will fall further behind its international peers, become increasingly attractive to fraudsters and continue to see many small businesses unnecessarily struggle as a result.”

Richard Allen, Campaign Manager for Retailers Against VAT Abuse Schemes (RAVAS) said,

“I’ve been working on this issue for several years and am delighted that AAT are publicly backing what I’ve long said is essential if the UK is serious about ending online VAT fraud, helping British SMEs and raising billions for the Exchequer.

"If no action is taken, there is a very real danger that like the Channel Islands VAT loophole on CDs and DVDs - that was quickly identified in the late 1990’s but ignored for 15 years - that the Government loses out on much needed revenue and legitimate businesses collapse or struggle unnecessarily.”