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HMRC cuts data checks despite VAT fraud increase

HMRC has radically reduced inquiries into sellers using online platforms despite apprehension over VAT evasion and increased complaints from retailers.

18th Feb 2021
Staff Writer AccountingWEB
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April 2020 to Jan 2021, HMRC sent only 80 data requests, its lowest figure, to online platforms on sellers using their service, compared to 2,684 requests in the previous tax year. The information was provided from a freedom of information (FOI) request made by UHY Hacker Young.

Figures released under the FOI:

Year

Data requests issued by HMRC

2016-17 (first year HMRC gains  request capacity)

299 

2017-18

1,556

2018-19

2,317

2019-2020

2,689

2020-21

80

According to HMRC, it has reduced data requests to cope with the reallocation of HMRC to manage Covid support measures, including CJRS and SEISS.

“Online marketplaces need to be a level playing field for all sellers and right now, HMRC is allowing sellers overseas to have an unfair advantage,” UHY Hacker Young partner Sean Glancy told the Financial Times, who originally reported the FOI.

Glancy capitulated that HMRC had done a “vitally important job” supporting furlough, but that it “can’t come at the cost of allowing tax evasion to run out of control”.

HMRC’s diminished ability to inspect online sellers, therefore, raises questions about its capacity to enforce new Brexit tax regulations introduced in January, added Glancy. The new rules obligate online overseas vendors to register for UK VAT if selling items under £135 to UK consumers.

£1-1.5bn lost through VAT evasion by overseas sellers

HMRC is estimated by the Nation Audit Office to have lost £1-1.5bn through VAT evasion by overseas sellers on online platforms between 2016 and 2016. Many high street retailers have claimed this form of tax evasion has prevented them from matching online retail competition.

“The low numbers of requests for data in the 2020-21 tax year reflects the fact that the Covid-19 pandemic has meant that this has been a difficult time for businesses, and we recognise the impact of our data requests and the extra burden these would cause at this time,” responded HMRC to the freedom of information disclosure.

However, retail groups have responded to the cutback of checks in disapprobation, asserting this will only instigate more VAT evasion from overseas importers undermining tax compliant companies.

HMRC has “deserted their posts”, said campaign group Retailers Against VAT Abuse Schemes head Richard Allen. “HMRC’s attitude seems to be if you’re outside the UK, there’s nothing they can do,” he added.

Tackling online VAT fraud and error 

Seven online platforms, including Amazon, eBay ASOS and Etsy have signed The role of online marketplaces in co-operating with HMRC agreement. These signatories provide HMRC with data on the businesses operating within their marketplaces that sell to UK customers. 

The 2018 agreement asserts the agreement fosters “a collaborative relationship between HMRC and online marketplaces to promote VAT compliance by users of the marketplaces which is underpinned by a set of legal obligations on the online marketplaces and a set of legal powers of HMRC.” The purpose is to “assist HMRC with tackling online VAT fraud and error”.

According to HMRC, it has “continued to prioritise tackling fraud and criminal attacks throughout the pandemic, as well as supporting [its] customers”.

“HMRC regularly asks for data from third parties which is used to identify areas where we need to educate customers on their obligations,” it added. “We also use the data to identify non-compliance and support customers to get their tax affairs up to date.”

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By SteveHa
18th Feb 2021 16:08

Quote:
According to HMRC, it has reduced data requests to cope with the reallocation of HMRC to manage Covid support measures, including CJRS and SEISS.

This was as far as I got before HMRC outraged me. They will continue to cut all the corners that they feel like to meet the needs caused by the pandemic, whilst forcing the profession (who quite frankly, are doing most of the work for them) to absorb it with no concessions whatsoever.

It's about time that HMRC practices were put out to public scrutiny in a transparent fashion, with full details of what they will do, and what they don't condone compared with what they themselves do and don't do.

Perhaps, then, the taxpaying public will get a feel for how much discrimination there is between the Government and the people there really is.

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