Report published 18 October 2017. Government response published 7 December 2017.
Report and response published
Scope of the inquiry
In 2015-16 an estimated £1 billion to 1.5 billion of tax revenue was lost to online VAT fraud and error.
These losses occur when sellers based outside the European Union import goods into the UK for sale to UK customers. Their products are stored in the UK and then dispatched to buyers. VAT goes unpaid when sellers do not declare the correct value of their imported goods, use false VAT numbers, or avoid registering for a VAT number at all.
In April 2017 the National Audit Office (NAO) published an investigation into online VAT fraud and error, and the effectiveness of HMRC's response. It identified difficulties in estimating the scale and impact of the problem, including how much of the lost tax revenue was due to error, and how much was deliberate fraud.
The NAO report also found that VAT registrations from non-EU sellers have increased since HMRC was given legislative powers to enforce compliance in September 2016—but the powers have not led to any prosecutions.
The NAO also looked at the role of online marketplaces such as Amazon and eBay in encouraging compliance from sellers using their sites. Both sites have strategies in place to encourage compliance but point out that ultimately responsibility lies with HMRC, which has access to confidential taxpayers' data.
This Public Accounts Committee inquiry will examine the scale of the problem, the Government's response to tackling online VAT fraud and error, and how it will improve its response in the future.