PAC urges HMRC to take action on online VAT fraud

25 Oct 2017

In a new report, the Public Accounts Committee (PAC) has urged HM Revenue & Customs (HMRC) to take steps to combat online VAT fraud in the UK.

In its report, the Committee discovered that sellers based outside of the EU are neglecting to charge VAT, and therefore are able to undercut the prices set by UK businesses ‘by up to 20%’. It found that online VAT fraud committed by overseas sellers is costing UK businesses and taxpayers over £1 billion each year.

Within the report, the PAC criticised HMRC for being ‘slow to respond to the growing risk of VAT fraud by online sellers’.

It has outlined a series of steps that HMRC could take to help combat online VAT fraud, including producing an updated estimate on the scale and impact of the online VAT fraud ‘tax gap’, speeding up the introduction of new VAT measures and setting short and long-term targets for reducing the amount of VAT lost through non-compliant sales.

Commenting on the matter, Meg Hillier, Chair of the PAC, said: ‘HMRC needs to be far tougher in protecting the interests of British businesses and taxpayers. As a priority, it must inject more urgency into enforcement action. But it should also push the case for further new powers.’

In response, a spokesperson for HMRC stated: ‘We introduced tough new rules last year allowing us to hold online marketplaces liable for unpaid VAT by overseas sellers and since then we have seen a tenfold rise in the number of sellers registering for VAT.’