On 13 March 2018, HMRC and HM Treasury launched a consultation on a “split payment” model for collecting VAT on online sales by non-UK sellers. This is in response to the growth in online shopping which, in the view of the Treasury, is resulting in significant losses of VAT to the Exchequer. The aim of the consultation is to explore possible options for how a potential split payment mechanism could work to combat online VAT fraud.

The Government’s favoured approach is for VAT to be collected by merchant acquirers or payment service providers registered as trusted to comply with the rules (or by payment card issuers if there are none). The amount collected would be calculated using a net effective rate determined for each non-UK business, updated annually according to the preceding year’s VAT liability (or using the standard rate if the business did not communicate calculation information to the VAT collector).

Throughout the consultation period HMRC will continue one-to-one meetings with stakeholders and run collaborative workshops to test emerging views over the spring and summer. HMRC invites all those with an interest to get in contact to make arrangements to attend a workshop.

Anyone wishing to contribute and provide comments in response to the consultation are requested to do so by 29 June 2018, by email to: indirecttax.projectteam@hmrc.gsi.gov.uk.

Details of the consultation are available to view here.