Online marketplaces should be compelled to collect VAT

07 May 2020

The government should compel online marketplaces to collect and remit VAT, according to the Association of Accounting Technicians (AAT).

The AAT was responding to the 'Claims and Elections Review' call for evidence published by the Office of Tax Simplification (OTS). It said the move would help combat online VAT fraud and create a level playing field for domestic sellers.

HMRC figures for 2016/17 suggest that the tax loss from online marketplaces was between £1 billion and £1.5 billion, with overseas sellers contributing to approximately 60% of this VAT loss.

According to the AAT, in addition to the loss of revenue, the effect on the small business community, both firms trading online and physical high street retailers, is 'extremely detrimental'.

Pressure group Retailers Against VAT Abuse Schemes (RAVAS) has confirmed that many small businesses have collapsed as a result of the unfair competition that VAT fraud creates. Many more have seen a substantial reduction in earnings, harming investment, productivity and tax revenue.

The AAT said: 'The case for obliging online marketplaces to collect and remit VAT is compelling. It would substantially reduce the administrative burden for small businesses who trade online; level the playing field for all small businesses, whether bricks or clicks; reduce VAT evasion; highlight a positive difference with the EU; raise much-needed revenue for the Exchequer; and crucially it would also help make the UK a more attractive place to do business.'