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Government to consult on online VAT changes

Government to consult on online VAT changes

The government has opened consultation on proposed changes to the tax system, most notably on how to charge VAT on online sales.

Other proposed changes include a tax designed to reduce plastics use and a crackdown on tax avoidance by global tech giants.   

The government had opened consultation on the three proposed changes after the Autumn Budget. All three consultations had closed by 31 January, but were reopened following today’s speech.

‘We will consult on how online platforms could help their users pay the right amount of tax and we will also consult on a new VAT collection mechanism for online sales,’ said chancellor Philip Hammond, in his Spring Statement.

Users of online platforms such as eBay have been accused undercutting UK rivals by failing to charge VAT at point of sale.

'The days of businesses masquerading as individuals to avoid tax when selling goods on online platforms like ebay are numbered,' said Toby Ryland, corporate tax partner at accountant HW Fisher & Company.

'The government has long identified this problem as a serious drain on its VAT revenues, and the chancellor now plans to tighten the screw further.

'While this is still just a consultation, it opens the door for the government to force online platforms to deduct VAT from sales, and then oblige sellers to prove they are eligible to claim it back.

'However such an approach would be a hammer to crack a nut, and is likely to raise lots of tricky questions about whether the platforms will have to deduct VAT from all sales, or just those made by sellers they think are businesses.'

Hammond also said that the government would seek advice on ways to encourage cashless digital transactions, while also ensuring that cash remains available.

Meanwhile, the government published some of the findings of its consultation into the tax practices of large technology companies.

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