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UK – VAT split payment system

Date24 Apr 2017

Recently the UK government launched a consultation on the use of split VAT payments for the e-Commerce industry.

This split payment mechanism consists of the customer paying the VAT share straight to the relevant tax authorities, instead of the usual arrangement where the supplier gathers this VAT amount from the customer and pays this VAT to the authorities, as part of their VAT return calculation.

The planned mechanism would apply to B2C online sales made by foreign businesses to UK individuals. These customers would pay VAT on the online purchases straight to HMRC. Based on other initiatives in this industry, we would expect split payments to be required only on sales made by foreign non-EU companies selling their goods in the UK.

There have been multiple initiatives regarding VAT fraud in the online industry, such as requiring a fiscal representative when registering as a foreign non-EU online business or extending the liability of the VAT payment to online platforms, such as Amazon or eBay, hence, making them responsible for any VAT payment missed by their users.

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