The Association of Accounting Technicians (AAT) has welcomed recent reports suggesting HMRC plans to end the status of online marketplaces as facilitators of online transactions, which will require them to collect and remit VAT from January.
The group previously called for online marketplaces, including Amazon, eBay and Etsy, to be liable for VAT collection and remittance in the UK and made detailed reference to this in its submission on the 2020 Budget proposals to the Treasury Select Committee.
According to HMRC figures, VAT fraud on online marketplaces cost the Exchequer between £1bn and £1.5bn in 2016/17.
HMRC further estimated that overseas sellers contributed to approximately 60% of this VAT loss. This figure is likely to be an underestimate given that in 2017 the Public Accounts Committee concluded: “HMRC’s estimate of the impact of online VAT fraud is out of date and flawed.”
In addition to the loss of “much-needed” revenue – particularly with the economic impact of coronavirus (Covid-19) – the effect on the small business community, both those trading online and physical high street retailers, has been extremely detrimental.
Adam Harper, AAT director of strategy and professional standards, said: “This is a welcome development and would seem to suggest that HMRC has finally recognised – as we have been saying – that the measures introduced in 2016 to reduce VAT fraud have not been sufficient.
“By taking more effective action to require online platforms to collect and remit VAT on all transactions the government will at least be following the examples in other countries, including Australia, the US and New Zealand, all of whom have already successfully adopted this practice.”