Alternative methods of collecting VAT from overseas online businesses are being considered by HMRC.
On 20 March 2017, a ‘call for evidence’ on a new VAT collection mechanism for online sales will be initiated. This is the next step in tackling the non-payment of VAT by some overseas traders selling goods online to UK consumers.
The new mechanism would harness technology to allow VAT to be extracted directly by HMRC from transactions at the point of purchase. We await details of the proposal.
This is often referred to as a ‘Split Payment’ model and is currently used in Italy for supplies to government agencies, an arrangement which has been extended with European Commission permission.
At present, the alternative method for collecting VAT is expected to affect overseas online traders.