UK VAT Split Payments consultation

The UK has announced in the March 2018 Spring Statement a further public consultation on adopting anti-VAT fraud Split Payments on e-commerce. The mechanism would require the VAT-element of online sales to be paid directly to the UK tax authorities at the time of purchase.

Split Payments are already used to a limited extent in Italy and Austria to tackle VAT fraud. Romania has introduced it this year on companies in financial difficulties. Poland is planning to introduce it on some transactions from 1 July 2018.

The UK first called for public views on Spilt Payments in the 2017 Spring Budget. This builds on other anti-VAT fraud measures introduced in 2016 and 2017. HMRC has estimated that fraud by non-resident online retailers may be costing £1.5billion in unreported VAT. It believes that by requiring VAT to be paid directly to it at the time of the online sale this could significantly reduce missing revenues.

The questions to be reviewed in the latest consultation includes:

• Which party in the transaction is best placed to identify and pay the VAT element directly to the tax authorities. At present, the UK believes it is either: for UK transactions, the merchant; and for non-UK residents, the credit card payments companies.
• The role of online marketplaces in determining the VAT and Split Payment calculations
• How to calculate the VAT due
• Timetable to build the optimum IT by all parties

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