ACT part of coalition letter calling for consultation on online VAT reform
Posted on in Business News , Cycles News
A 18-strong coalition of business organisations and tax experts, including the ACT and led-by its parent company Bira, has today written to the Exchequer Secretary to the Treasury calling for a formal consultation on reforming VAT online marketplace liability rules.
The coalition warns that gaps in the current system are being exploited by some overseas sellers using online marketplaces to avoid VAT, allowing them to undercut compliant UK retailers and placing honest British businesses, including those in the cycling sector, at a structural disadvantage. Independent analysis suggests this VAT loophole could be costing the Exchequer around £700 million a year.
The letter urges Government to consider extending VAT online marketplace liability rules so that online marketplaces are responsible for VAT compliance, helping to level the playing field for UK businesses and protect tax revenues.
The full letter is set out below.
Dear Exchequer Secretary,
VAT online marketplace liability rules
We are writing to urge the Government to bring forward a consultation on extending VAT online marketplace liability rules. Consideration of this reform is increasingly important to address clear unfairness in the current system, which disadvantages honest British businesses and allows fraudulent sellers to compete on an uneven playing field.
Online marketplaces are more important than ever for businesses. They offer an easy and low-risk way particularly for small businesses to participate in online retail, reaching new customers and growth. However, as retail becomes increasingly competitive and omnichannel, even the smallest advantage can determine whether a business survives or fails.
At present, online marketplaces are only required to collect and remit VAT on certain transactions involving non-UK established sellers. Unfortunately, this exception is being exploited by bad actors misrepresenting themselves as UK-established businesses to avoid VAT entirely. While we understand online marketplaces have been constructive partners in tackling this issue, there is only so much that platforms can do to prevent determined fraudsters from exploiting the current system's structural vulnerabilities. This leaves the honest majority who comply with the rules, including very small UK businesses, forced to compete against foreign sellers benefiting from a tax advantage. This is simply not sustainable for UK firms trying to run legitimate businesses while facing a historically high cost of doing business.
As considered by the Government’s informal review last year, extending the VAT online marketplace liability rules is a way of stopping this abuse. This abuse must be stopped to give UK businesses greater confidence that they are competing fairly and help enhance trust in an e-commerce environment that many now depend on for growth. Independent analysis also suggests that extending these rules could raise around £700 million per year, suggesting there is an opportunity for the government to consult on proposals to protect both compliant businesses and the public finances.
We understand that concerns have been raised about potential impacts on the smallest sellers, particularly those below the VAT threshold. As organisations that also represent these businesses, we believe any reform can and should be developed in a way that protects small firms from unintended consequences or additional administrative burdens, for example by excluding unregistered businesses.
The Public Accounts Committee has repeatedly warned that VAT fraud facilitated through online marketplaces is increasing and that the existing regime has failed to keep pace with the evolution of increasingly sophisticated methods used by bad actors to avoid UK VAT collection. Alongside findings from the National Audit Office, Parliament has been clear that stronger measures must be explored to prevent abuse and protect compliant businesses.
We urge the Government to consult on this issue as soon as possible to demonstrate a clear commitment to tackle fraud and level the playing field for UK businesses and increasing tax revenues or the Exchequer from non-compliant businesses.
We stand ready to engage constructively with the Government in this debate.
Yours sincerely,
Andrew Goodacre
CEO
British Independent Retailers Association
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On behalf of the following co-signatories:
- Association of Chartered Certified Accountants
- Association of Cycle Traders (ACT)
- British American Business
- British Chambers of Commerce
- British Retail Consortium
- Chartered Institute of Taxation
- Dan Neidle, Tax Policy Associates
- Entertainment Retailers Association
- Enterprise Nation
- Entrepreneurs Network
- Institute of Chartered Accountants in England and Wales
- Institute of Directors
- Logistics UK
- National Association of Jewellers
- Radio, Electrical and Television Retail Association
- Retail Sector Council
- Retailers against VAT Abuse Schemes
- UK Warehousing Association
Make your voice heard as part of the independent cycling retail sector, and join the conversation on this vital issue, on Bira Connect.