With self-assessment season done, businesses (and their accountants) are turning to their next big task – VAT. Businesses submit VAT returns four times a year to confirm how much they owe. Normally, this is a simple, if tedious, task.

Recently, though, the rise of online marketplaces has made VAT much more difficult to enforce.

Businesses using platforms like Amazon and eBay are liable for VAT if their goods are sold within the EU. However, actually making non-EU businesses pay is nigh-on impossible, as it would require co-ordination with their home governments. This is supposedly dealt with by “Joint and Several Liability” (JSL) notices, which makes the marketplace responsible for paying VAT if sellers do not. Yet JSL notices only require the marketplaces to ensure that HMRC’s VAT number matches the company’s. At no point are they actually required to pay the VAT!

VAT fraud of this type supposedly costs HMRC up to £1bn a year in lost revenue – as well as allowing competitors to undercut EU businesses by up to 20%. With VAT being the first tax process made fully digital under MTD, is it time for HMRC to seriously look at how they’re enforcing VAT in the digital world?

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