Concerns over Online VAT fraud

The Public Accounts Committee (PAC) has voiced a concern that only a fraction of online VAT fraud VAT is being clawed back by HM Revenue & Customs (HMRC) and that the organisation’s response to the issue is far too slow.

In a letter to Jon Thompson, the Chief Executive of HMRC, Meg Hillier from the PAC said that the £310 million extra revenue raised through online sellers since March this year is encouraging but nowhere near the estimated total.

It is believed that online VAT fraud costs the UK economy between £1 billion and £1.5 billion a year, so £310 million is ‘only a fraction of the total level’, given HMRC’s new powers to tackle the problem.

As part of these new powers, which came into effect in April, the PAC and HMRC discussed the new memorandums of understanding (MOU) that were signed by seven online marketplaces and, at the time, Mr Thompson highlighted the benefits of marketplaces producing data voluntarily and collaborating with HMRC on enquiries.

Mr Thompson also said he expected that the recent measure, that places an obligation on marketplaces to police overseas businesses themselves without waiting for a joint and several liability notice, to be highly effective in tackling online fraud.

However, as Ms Hillier points out in the letter ‘it remains to be seen how HMRC will enforce this’, so the Committee expects HMRC to monitor marketplaces’ actions closely.

The letter closes by saying that the Committee looks forward to receiving a full update on HMRC’s progress in tackling online VAT fraud in 2019, including an update on the impact of the fulfilment house due diligence scheme.

Ms Hillier concludes by urging HMRC not to lose sight of the importance of continuing to tackle online VAT fraud during preparations for Brexit as the matter ‘remains a real threat to British businesses’.

Julian Borley, Director of VAT at Milsted Langdon, said: “HMRC is facing ever-increasing pressure to crack down on the issue of VAT fraud.

“VAT-registered businesses need to make sure they are fully compliant with the law and operating in the correct way. If in doubt, firms should seek specialist advice.”

For more information about how Milsted Langdon can help, please contact Julian by emailing or calling 0117 945 2500.

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