UK launches online VAT inquiry following fears of Brexit fraudster surge

An inquiry into online value-added tax (VAT) fraud is being launched this autumn, following concerns there may be an uptick in scams after Brexit. It is estimated that the UK is missing out on between £1bn and £1.5bn a year from these sorts of deceptions, while the big online marketplaces have been accused of profiteering from …

[iron]

Brexit happens in 6 weeks and should really have happened months ago but they are only just now starting an inquiry into whether it will have any effect on tax collection? What the hell do Westminster do all day? What have they been doing for the last couple of years? And how do we get rid of every single last one of them from BoJo to the tea ladies?

[phuzz]

"Brexit is scheduled to happen in 6 weeks"

FTFY

Who knows if/when it's actually going to happen? (Bookies maybe?)

[katrinab]

4/1 odds on Sky Bet for it happening between Jan-Mar 2019.

Gamblers must be even more stupid than I thought they were.

[Cederic]

Comically I think Parliament have not just granted the Prime Minister permission but imposed upon him an obligation to change the date on which Brexit happens - so it might occur on 18th October.

[katrinab]

We can only leave early if we have a deal lined up. That's not going to happen even if The Incredible Sulk comes back with an absolutely perfect deal that everyone agrees with, there just isn't the time to implement it.

[Phil O'Sophical]

only just now starting an inquiry into whether it will have any effect on tax collection?

Well, no. They know it will return to the pre-1992 model, but are now wondering how online sales (which didn't really exist then) will be abused when that happens.

I remember those days, order something from Maplin & not pay UK VAT. Then declare & pay the VAT locally, which we all did, I'm sure.

And how do we get rid of every single last one of them from BoJo to the tea ladies?

An election for some, but not the tea ladies. What do you have against tea ladies anyway (or tea boys for that matter)? Doesn't tea help us avoid dementia? Maybe there aren't any in Westminster, that could explain a lot.

[BebopWeBop]

Well, they killed complimentary tea and coffee at the Home Office when I was seconded there for 9 months (great 'improvements' on productivity as everyone decamped on a regular basis to the nearest caff. So maybe w Whutehall.

Westminster still gets subsidised meals and bars, so little chance of that happening in the Commons or Lords.

[Anonymous Coward]

Brexit happens in 6 weeks

> Brexit happens in 6 weeks and should really have happened months ago but they are only just now starting an inquiry into whether it will have any effect on tax collection? What the hell do Westminster do all day?

Brexit happened three years two months and thirty days ago. I suspect the current shenanigans on both sides of the House as part of the establishment strategy to sabotage Brexit, then scare the electorate into a second vote.

[big_D]

Other way around...

We have it the other way around.

We used to buy a lot on Amazon Germany from UK suppliers. They all charged us VAT, but couldn't provide us with a VAT invoice, because they weren't registered. We ended up having to send a lot of stuff back because of that.

Now we are very careful about where we source our products. The UK, China and a few other Asian sources just aren't worth the hassle of trying to get an invoice.

[BebopWeBop]

Re: Other way around...

The whole of the UK? Really?

[big_D]

Re: Other way around...

No, but when you have to return 4 out of 5 Amazon Marketplace purchases from UK sources, because of their inability to give you a VAT invoice and Tax Ident number, most companies I've worked with just make a policy decision - don't buy from Amazon Marketplace sellers you know come from countries that don't enforce VAT / sales tax registration.

For larger items, we do source some of them from the UK and we do get proper VAT invoices, but for small items from AM sellers, it is better to buy from a source you know is compliant with your tax laws.

Over here, if you run a business, you must register for VAT and you must always charge VAT and provide a VAT invoice. Many small UK sellers on Amazon Germany charge VAT, but don't have an VAT number or international tax ident and can't provide a valid VAT invoice, which means that we then have problems declaring the purchases and recovering the VAT. The accountants just throw out the purchase and tell us to reclaim the purchase price, because it is easier than arguing with the Finanzamt.

[Phil Endecott]

Re: Other way around...

The issue is that a UK seller with a turnover of say £50,000 per year in the UK and £5 per year of things posted to Germany is not required to be registered for VAT in the UK because of the £80,000 threshold, but they are required to be registered (e.g. using the “one stop shop”) in other EU countries that don’t have a threshold.

The sensible thing for someone to do in that situation is to refuse to sell outside the UK - unfortunately. It would be better if eBay/Amazon etc. could (optionally) handle this for them.

[big_D]

Re: Other way around...

Unfortunately, eBay/Amazon can't handle it for them, unless Amazon/eBay buy the product off the company in the UK in the first place (in which case, they would probably go to their wholesaler and they must add their markup). The seller must have the VAT number, not the platform over which the transaction is completed.

[Anonymous Coward]

Re: Other way around...

I have similar challenges. Because of the massive amount of packages from china flooding the postal system, Sweden now has a rule that any package from outside the EU without supporting evidence of VAT & tariff payment will be subject to VAT at the swedish rate plus a handling fee of at least £7 plus potentially import taxes. This requirement also adds a couple of weeks to the shipping time.

Since a comical amount of "UK" sellers on ebay and Amazon just dropship stuff straight from China, it means even now I am very selective about ordering anything from the "UK". When the UK goes out of the EU I likely won't be buying anything.

I can also foresee many other EU countries adopting the same rules once the UK joins China in flooding the single market with non-VAT goods.

[DontFeedTheTrolls]

"Don't worry, we'll have Free Trade agreements with everyone and business will be wonderful and hassle free. No more red tape."

[Roland6]

<sarcasm>Can't have a free trade agreement with the EU as would mean agreeing to the withdrawal Agreement and doing a deal with the EU; can't possible have that...</sarcasm>

[macjules]

There is nothing stopping a seller ..

"There is nothing stopping a seller saying they made £100 in sales rather than the £100,000 they actually made,"

©2017/2018/2019 Apple, Amazon, HPE et all

[Anonymous Coward]

An exercise for the reader.

Compare and contrast the number of people employed to investigate tax fraud with the number of people employed to investigate benefit fraud, with respect to the potential sums involved......

[BebopWeBop]

Re: An exercise for the reader.

Yes but that would be seen as 'anti-business and condemned by the Daily Heil and other papers, while the latter is lauded for hitting the fraudsters (and the disabled and and and) so lauded. Bit like Tax evasion and the dodgier tax avoidance schemes.

[Anonymous Coward]

Re: An exercise for the reader.

Current estimated VAT fraud - £1bn to £1.5bn per year (according to the article.)

Estimated benefit fraud in 2016 - £2.4bn per year (according to the UK Fraud Costs Measurement Committee.)

Total estimated tax fraud 2016 - £15.4bn (also from the UKFCMC.)

[Spanners]

You need to remember...

...after Brexit the UK could look like a soft touch...

That is a major purpose of Brexit.

If you look at some of the, rich, people pushing Brexit, you may wonder if any of them have a hint of "I could make a lot more money if the EU wasn't so annoyingly good at making me pay my taxes" about them.

[Phil O'Sophical]

Re: You need to remember...

if the EU wasn't so annoyingly good at making me pay my taxes

In fact, it's so good at it that France, the UK, Germany etc. are all considering national laws so that Amazon, Google etc. pay the taxes that the EU lets them avoid.

[Teiwaz]

Re: You need to remember...

if the EU wasn't so annoyingly good at making me pay my taxes

In fact, it's so good at it that France, the UK, Germany etc. are all considering national laws so that Amazon, Google etc. pay the taxes that the EU lets them avoid.

Poster said 'People', not megacorps - who seem to manage to minimise tax payment on their massive profits.

[BuckeyeB]

Re: You need to remember...

Many people just don't get it that corporations don't pay ANY taxes. To them a tax is just a line item expense. They're going to make x% profit. If a government raises taxes, they'll just raise prices to pay it. The consumers pay all taxes always. You pay taxes on the income you make, then you pay the sales taxes on the things you buy and also pay the corporate taxes on the things you buy through higher prices.

[DJO]

Re: You need to remember...

I could make a lot more money if the EU wasn't so annoyingly good at making me pay my taxes" about them.

Good grief, you only just worked that one out?

The only reason that BoJo, Mogg and their donors want Brexit is to stop the forthcoming EU legislation designed to eliminate tax evasion by use of off-shore banking, also the only way to be certain it wont enter UK law is by No Deal, which is exactly what they want, have always wanted and will do everything they can to achieve.

https://www.taxjustice.net/2019/01/23/brexit-and-the-future-of-tax-havens/

https://truepublica.org.uk/united-kingdom/eu-tax-evasion-regulation-reason-brexit-referendum/

https://medium.com/the-jist/was-eu-tax-evasion-regulation-the-reason-for-the-brexit-referendum-980ba88a8077

https://www.thelondoneconomic.com/opinion/the-brexit-undertones-of-the-eus-impending-anti-tax-avoidance-legislation/21/06/

[BebopWeBop]

It is not quite an honour system. We pay and reclaim VAT (substantial) and I am sure that HMRC does match invoice and reclaim numbers - well I would hope so - can't be that difficult for businesses although it does require both sides to tango...

[John Mangan]

Defining terms

"It has already been a great success in other countries such as USA & Australia."

Given what I would kindly call the Government's loose use of the term 'great success' in a number of other spheres I would like more details on what qualifies as success in this context.

[W T Riker]

Lost VAT revenue

I’m sure the management consultants that provided the estimate of £1bn to £1.5bn in lost VAT revenues will be willing to lead the inquiry for a 10% fee.

[SVV]

What the government currently says

https://www.gov.uk/guidance/vat-imports-acquisitions-and-purchases-from-abroad

(Last updated 29 April 2016 - so that is REALLY helpful and shows how well prepared they are).

EU VAT rules are complex for goods and worse for services (especially online). There is no information I can see for what will happen with a "clean break" Brexit - expect total confusion as very few will be able to cope with sudden changes they've had no time to prepare for. This is the current summary of the rules I have :

Sale to EU non VAT registered – treat as UK sale. Add 20% VAT. Not on EC Sales list.

Sale of goods to EU VAT registered – 0% VAT. EC sales section on VAT return. Include on EC Sales list.

Sale of Services to EU VAT registered – 0% VAT. Not on EC sales section. Include on EC Sales list.

Purchase of Goods from EU VAT registered – Add 20% VAT. Included in EC acquisitions sections on VAT return.

Purchase of Services from EU VAT registered – Reverse charge, include in sales and purchases. Not included on EC acquisitions sections.

Should be fun for the accountants as this change happens in the middle of a tax year too.

[Len]

Re: What the government currently says

My theory for pushing through Making Tax Digital (while HMRC already had plenty on its plate because of the Brexit fallout) is that it makes turning on a dime and preventing errors much easier.

Flicking a switch on an algorithm because the VAT rules suddenly change is a lot easier than having to spend six months on an awareness campaign for everyone to start filing their quarterly (some times paper!) submissions differently.

Your post also suddenly made me realise that the 31st of October (if that is still the Brexit date, I think an extensions is now most likely) cuts right through a VAT quarter for many businesses. That means that the first two months of a quarter might fall under a different VAT regime than the third month. Holy shit.

[HowardH]

Re: What the government currently says

If by "Clean break" you mean "No Deal" Brexit the guidence (2019) is here:

https://www.gov.uk/government/publications/vat-for-businesses-if-theres-no-brexit-deal/vat-for-businesses-if-theres-no-brexit-deal--2

One thing that will go is the EC Sale Lists

"VAT for businesses if there’s no Brexit deal:

You will not need to submit EC Sales Lists (ESLs) for sales made after Brexit"

[Roland6]

Re: What the government currently says

>Should be fun for the accountants as this change happens in the middle of a tax year too.

Vat liabilities are calculated monthly, independently of tax year...

Also, the top VAT rate has previously changed mid year: changing from 17.5% to 15% (December 2008) before being increased to 17.5% (January 2010) and then to 20% (January 2011).

From having gone through the 2008~2011 changes, I expect the fun will be had as accountants discover the assumptions programmers made on VAT rates and liberally sprinkled their code with "magic numbers" because "the VAT doesn't change" and especially not partway through a financial period...

[I am the liquor]

Do we need it?

Is there a case for abolishing VAT entirely? (After brexit obvs.) The only people who actually pay it are the final consumers. You could get (roughly) the same people to pay (roughly) the same amount by upping income tax instead. The economy would save a fortune on VAT accountants and inspectors, and VAT fraud would be cut to zero at a stroke.

The most convincing reason I've heard for having VAT or sales tax is to encourage saving instead of spending; but isn't that out of fashion with policy wonks nowadays? The only form of saving that seems really essential from a public policy point of view is pension saving, and that would still be encouraged via income tax relief.

[Anonymous Coward]

The co-ordinated administration of value added tax within the EU

It's like something out of 'Yes Minister'. We're paying VAT to pay for administering the VAT. Going on the wikipedia entry, only an EU bureaucrat could of thought up such a scheme. How about totally eliminating VAT, that would also eliminate the "high administrative and cost burden for cross-border trade" and us the consumer ultimately paying the bill.

https://en.wikipedia.org/wiki/European_Union_value_added_tax

"With Brexit looming, the UK VAT collection system for online mail order needs to change fast, it is a disaster waiting to happen"

Food shortages, drug shortages, NHS staff shortages and now VAT shortages, is there no end to this calamity.