PAC chair flags online VAT fraud concerns

5 Oct 18

The chair of the Public Accounts Committee has written to the chief executive of HM Revenue & Customs concerned only a “fraction” of online fraud VAT was being clawed back.

Meg Hillier told Jon Thompson, in a letter sent on 2 October, that the £310m extra revenue raised through online sellers since march was “still only a fraction of the total level of online VAT fraud”.

“As you know, the committee and I have raised concerns on many occasions about the slow response to online VAT fraud by overseas sellers despite years of warning about the growing threat,” Hillier writes.

Official figures have estimated online fraud to cost the UK economy between £1bn and £1.5bn a year. The extra revenue came after HMRC was given beefed up powers in April this year to police online sellers and ensure they were paying VAT at the correct amount.

Hillier writes about a recent memorandum of understanding between seven online marketplaces, including Amazon, eBay and Etsy, and HMRC to share information, to combat the issue of online fraud.

“We trust you will be keeping a close eye on how marketplaces are honouring their commitments under the MOU,” she said.

The PAC chair also said that the committee was concerned about ‘phoenixism’, which is where an online company closes to avoid VAT obligations then opens under a difference name.

“This [‘phoenixism’] is an area marketplaces are expected to police themselves but, given the information which I know is being supplied to HMRC by campaigners on this practice, we trust you will monitor marketplaces’ actions closely”.

The letter followed Thompson’s evidence to the PAC on 5 September as part of an inquiry into the HMRC’s performance in 2017-18.

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