HMRC’s immediate priorities for VAT

HMRC has decided to focus on particular areas of improving VAT collection and administration and may not adopt the EU VIDA.

In this month’s VAT alert, we share the VAT areas that we understand HMRC is focussing on:

1. E-invoicing and real-time digital reporting – While the European Commission (EC) has published proposals to move to real-time digital reporting based on e-invoicing for businesses that operate cross-border in the EU, we understood from HMRC that that they receive adequate information from other sources for its risk management and fraud detection abilities, and therefore it is not a matter currently on their list of priorities
2. Alternative method of VAT collection (Split payments) – We understand that HMRC are at present considering the introduction of Split payment mechanism as an alternative method of VAT collection to close the VAT gap which can arise from cross-border online sales to UK consumers. This happens when overseas sellers who, through fraud or ignorance, do not comply with their tax obligations and VAT reaches the overseas sellers and never reaches HMRC. Split payment would aim to prevent this by holding payment intermediaries e.g., merchant acquirers, payment service providers, issuing banks responsible for effecting the split of VAT from the gross payment to overseas sellers.
3. HMRC service levels and VAT registration helpline - To save officers’ time, so they can focus on registration applications, rather than answering questions, HMRC had decided to close this helpline from 22 May 2023. HMRC will keep the decision to close the helpline under review.

Key takeaway

Now outside the EU, the UK is free to focus on what it sees are the priorities for VAT efficiency. We may see more divergence as time passes.