Impact of split payment model on UK businesses

HMRC must clarify its plans to crack down on VAT non-compliance by overseas companies that trade online. It is considering a new measure called a split payment model. VAT will be extracted from the price paid by consumers in real time using card payment technology and then deposited with HMRC. The aim is to reduce VAT losses from overseas businesses selling goods to UK consumers using online marketplaces estimated to have been between £1bn and £1.5bn in 2015-2016.

The Chartered Institute of Taxation has urged HMRC to continue to discuss the change with the tax profession because the original consultation left many unanswered questions. These include whether any split payment model would be limited to sales of goods situated in the UK by overseas suppliers or whether it would apply to a much greater range of online sales.

Alan McLintock chair of CIOT’s indirect taxes sub-committee said:...