Autumn Budget 2017: VAT split payment for online payments

VAT charged in respect of online supplies is collected by the supplier, held and paid to HMRC at regular intervals (eg after a quarterly VAT return is submitted to HMRC).

A call for evidence was launched on 20 March 2017 after the Spring Budget 2017 to develop a “split payment” model for the online supply of goods. The intention is that the VAT paid by customers will be collected in real time and is part of the government’s strategy to combat VAT fraud in online supplies.

On 1 December 2017, the government will publish a response document to the call for evidence.

It should come as no surprise that the responses highlighted the complexities of implementation and the government will set out plans in the response document for further engagement with external stakeholders, in preparation for a full consultation in 2018.

The government loses a large amount of VAT every year through fraud in online sales of goods. It is taking steps to clamp down on this fraud, and suppliers of goods through online sales are being heavily targeted.

If the government can overcome the significant practical issues, such suppliers will find that their receipts from customers will be reduced by the VAT element.