Extending VAT online marketplace liability to combat non-compliance – joint CIOT and LITRG response
The Chartered Institute of Taxation (CIOT) and the Low Incomes Tax Reform Group (LITRG) submitted a joint response to the HM Revenue and Customs (HMRC) and HM Treasury consultation on proposals to extend current online marketplace VAT liability rules to sales on Online Marketplaces by UK based businesses, when their goods are situated in the UK at the point of sale.
The consultation considers reforming the current VAT rules to achieve three key objectives:
- addressing as much of the VAT non-compliance as possible
- protecting businesses not required to register for VAT
- raising revenue from tackling non-compliance to fund improvements for the business rates system for high streets.
In our response we support the proposal to extend the Online Marketplaces VAT accounting rules to VAT registered UK based sellers. We also support the proposal that the minimum platform threshold is set at the VAT registration threshold, though note that this needs to work correctly for businesses that breach due to the turnover of the preceding twelve months so that their effective date of registration does not create a commercial disadvantage.
However, we do not support the VAT rate relief proposal in its current form. The increase in burdens and consequences for the smallest businesses appear disproportionate. Additionally, we would like to see HMRC consult with the Online Marketplaces to explore how timelier data sharing could improve the identification of business selling across multiple Online Marketplaces. We would also like to see further cross working with other government departments as demonstrated in HMRC’s recent increase in unannounced visits to high street retailers.
You can read the CIOT and LITRG’s joint full submission using the link provided. A link is also given to the original consultation on GOV.UK.