Internet VAT rules to change

Business that trade online should beware, as the VAT man may have you in his sights!

In a recently published report, HMRC comment that businesses trading on the internet will come in for great deal more scrutiny in the months to come.

I suspect that only the most troubled insomniac would consider that reading this week’s National Audit office Report on HMRC’s Annual Accounts for 2012-2013 would be a useful thing to do. You might be surprised however, to learn that parts of the report are actually both informative and interesting. One thing that definitely caught my eye was the comment made regarding the plans HMRC has to ensure it minimises fraud and evasion. The NAO is critical of the pace at which HMRC is working to deal with internet based fraudsters. They state;

“The timing of HMRC’s future plans does not reflect the scale of public and parliamentary concerns about the way these businesses operate.”

That’s a polite way of saying that HMRC needs to get a move on, and fast. HMRC will not enjoy reading such comments, so how are they likely to respond to them?

The report further states that;

“HMRC recognises the need to secure public confidence in its ability to tackle the risks of revenue loss associated with e-commerce. In March 2013, it began scoping work to review internet-based traders and identify those with greatest potential to commit VAT fraud.”

As mentioned above, this all means that HMRC will be paying internet traders a great deal more notice in the future, and their attention is unlikely to fall only those committing fraud. You will notice that in the above comments talk about the greatest potential to commit fraud. Any business selling goods on the internet has quite a bit of potential to do so, particularly where they are selling to private individuals abroad. HMRC are likely to take this view.

So what should businesses in this sector take now? It’s important that they take steps to make sure that their VAT affairs are in order now, before HMRC come knocking on their door. That way, they can correct any careless errors that have been made now, thus avoiding interest and penalties.

If you have any questions on the new regime, or about VAT generally contact us on 0845 177 5500, or contact us online

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