Online VAT fraud and error costing UK dear
A report published by the National Audit Office (NAO) estimates that online VAT fraud and error cost the UK somewhere between £1bn and £1.5bn in lost tax revenue during the 2015/16 financial year.
Under current UK tax rules, any traders based outside the European Union (EU) who sell goods to UK customers over the internet are supposed to charge VAT if the goods are already in the UK at the point of sale.
In many cases, overseas sellers will export their goods to the UK to be stored in ‘fulfilment houses’ before they are sold through online marketplaces such as eBay and Amazon.
However, Whitehall’s spending watchdog says that an increasing number of such sellers are not paying the appropriate sales tax on such items, and the UK is losing out significantly as a result – particularly as online sales accounted for 14.5 per cent of all UK retail sales in 2016.
Similar concerns have been raised in the past, and online marketplaces such as eBay and Amazon insisted that a lack of awareness was the key problem.
Both companies have since introduced new measures to ‘educate’ traders on VAT trading and compliance, but the NAO’s report suggests that HM Revenue & Customs (HMRC) has so far been unable to determine what proportion of 2016/17’s VAT losses were down to lack of awareness, technical error, or outright fraud.
The NAO has also suggested that warehouses operated by some prominent traders are being targeted by organised criminals in China and the UK to facilitate the handling of misclassified and undervalued goods.
To date, there have been no prosecutions for online VAT fraud, but HMRC has said that fulfilment houses across the UK – of which it estimates there could be anywhere between 500 and 3,000 – now form the primary focus of its ongoing compliance efforts.
Meg Hillier, chair of the public accounts committee, has called on HMRC to “finally step up and act to confront this growing [VAT fraud] problem”.
She labelled the issue “a double whammy for taxpayers,” and said that “overseas sellers who avoid VAT” are “hitting British jobs” by undercutting “the prices charged by small, law-abiding British businesses”.
In September 2016, new legal powers were introduced ensuring that online marketplaces can now be held jointly liable for non-payment of VAT in instances where they have been informed of an issue with a seller.
HMRC has estimated that such powers “will secure £875m for the UK taxpayer”.
- Entrepreneurs’ Relief changes expected in March Budget
- Get ready for a range of tax changes this April
- VAT zero-rating now applicable to businesses e-publications
- Latest case highlights the dangers of not meeting workplace pension requirements
- When was the last time you checked your NIC record?
- Property tax implications of getting divorced
- Make the most of the Brexit implementation period
- More than 3,000 taxpayers complete self-assessment on Christmas Day
- Should your company pay a data protection fee?
- SMEs now wait 23 days for late payments, new study finds
- Reminder: National Living Wage set to increase from April
- HMRC launches revamped CEST IR35 off-payroll working tool
- New Advisory Fuel Rates
- VAT receipts reach record level of £133 billion
- Around half of the UK’s SMEs admit to making errors on taxes
- Late payments a huge drain on SMEs
- The end of the help-to-buy ISA – What’s next?
- HMRC urges taxpayers to be vigilant ahead of self-assessment deadline
- Keeping workplace gifts tax-free this Christmas
- Annual R&D spend in the UK reaches £25 billion
- Countdown to the 31 January Self-Assessment Tax Return deadline begins
- Grant scheme opportunities for electric vehicle charging infrastructure at work
- Spanish holiday home owners cautioned over post-Brexit tax impact
- Businesses and contractors offered clarity on IR35
- Pension holders to be refunded £54 million of overpaid tax
- Newly cohabiting parents warned over new tax charge
- HMRC trialling self-assessment checks to help local authorities to recover council tax
- Overseas employees potentially face double NICs liability following a no-deal Brexit
- New figures show a sharp increase in Inheritance Tax (IHT) receipts
- Non-VAT-registered businesses need EORI number to trade with EU customers and suppliers post-Brexit
- 25,000 companies receive penalties for the late filing of accounts in just one month
- HM Revenue & Customs has started carrying out PAYE tax investigations remotely
- Wages rise at the fastest rate in a decade
- Renovated homes that have been empty for two years can qualify for a reduced rate of VAT
- Government delays introduction of VAT reverse charge!
- Making a voluntary disclosure to HMRC
- MTD for VAT filing deadline missed by one in ten businesses
- Boots, Asda and Specsavers push back against business rates
- Half of all SMEs make VAT return mistakes
- Tax investigations reap in £13 billion for the treasury
- How to tell if an email is fraudulent
- Government’s draft IR35 legislation contains important changes
- Construction businesses only have weeks left to prepare for the VAT reverse charge
- HMRC outlines changes to Capital Gains Tax treatment on second homes
- Summer childcare costs cooldown with Tax-Free Childcare
- Employment Allowance to be restricted from next year
- Principal Private Residence Relief and Lettings Relief changes due in April 2020
- New figures show that a quarter of estates paying Inheritance Tax (IHT) are investigated by HMRC
- Wealthiest UK families save nearly £700 million a year in Inheritance Tax
- Taxpayers’ bills delayed by payment on account errors
- SMEs unaware of £1 million annual investment allowance
- Businesses encouraged to increase readiness for no-deal Brexit
- Value of UK SMEs reach £3 trillion
- More than 150 chief financial officers and senior finance executives personally fined by HMRC last year
- Remember to pay the annual data protection charge
- Incorporation no longer automatically resets the two year requirement for sole traders
- Government confirms that HMRC will get a higher priority when firms go bust
- MTD for VAT - relaxation on posting supplier statements
- Significant lack of awareness around gifting rules for IHT
- EIS and SEIS tax relief funding passes £2.1 billion
- New code launched to help protect victims of sophisticated banking fraud
- Revenue tests new trigger to increase the accuracy of PAYE codes
- Pass on up to £950,000 tax-free in 2019-20
- Beware the Employer Compliance Check Questionnaire
- Employers must comply with new payslip rules
- Additional year to prepare for Making Tax Digital for taxes other than VAT
- IR35: off-payroll working rules set to change next year
- Registering for Making Tax Digital for VAT takes seven days, warns HM Revenue & Customs
- Are you registered for Making Tax Digital yet?
- ITV presenter Lorraine Kelly wins important IR35 appeal
- UK SMEs hit by £17.4 billion cybercrime bill in 2018
- Tax-free HMRC scheme assists families with childcare costs
- Invoice fraud cost UK firms £93 million last year
- Businesses get to grips with new employment costs
- Spring Statement 2019
- National Living Wage to rise next month
- Are you making full use of the generous R&D relief scheme?
- Tribunal finds in favour of Middlesbrough FC in low pay claim
- Make the grandest romantic gesture and reduce your tax bill
- New advisory fuel rates for company car users
- Delay in issuing Self-Assessment penalty notifications
- Making Tax Digital productivity boost expected to be worth billions to UK SMEs
- Automatic Enrolment contributions to increase
- HM Revenue & Customs drops insistence that all company directors must submit tax returns
- Late payers to be flagged up to businesses under new proposals
- Just over half of businesses are prepared for Making Tax Digital
- Entrepreneurs’ Relief changes fail to meet up to the test
- Payroll sector prepares for key changes in 2019/20
- Taxpayers treated unfairly by HMRC, says House of Lords report
- Taxpayers offered online tool to assess their self-assessment requirement
- Tax rates rise twice as fast in the UK than the international average
- An end to the Entrepreneurs’ Relief ‘dilutions dilemma’?
- Brexit uncertainty sends small business confidence to a seven-year low
- Debt recovery costs small businesses an average of £9,000
- Smaller estates should not have to file IHT paperwork, says Office for Tax Simplification
- Big increase in P2P lending
- 180,500 first-time buyers benefit from relief on Stamp Duty Land Tax (SDLT)
- Italian e-invoicing requirements make Making Tax Digital look like a walk in the park
- House of Lords calls for a delay to Making Tax Digital
- UK takes second spot for tax compliance in G20