Question to the HM Treasury:

To ask the Chancellor of the Exchequer, what estimate he has made of the amount of VAT evaded by overseas sellers on online platforms that has been recouped following individual data requests by the his Department in each of the tax years (a) 2015-16, (b) 2016-17, (c) 2017-18, (d) 2018-19, (e) 2019-20 and (f) 2020-21 to date.

The Government takes the issue of VAT evasion by overseas sellers on online platforms very seriously. In September 2016 the Government introduced new legal powers allowing HMRC to hold online marketplaces jointly liable for future VAT liabilities of non-compliant overseas sellers on their platforms.

One of HMRC’s methods for tackling this problem is to make both bulk and individual data requests of online marketplaces about the sellers on their platforms, to inform enquiries into any possible non-compliance.

HMRC began making such requests after the introduction of the new powers in September 2016. Over time, the quality of the bulk data being provided by online marketplace platforms has improved, significantly reducing the need for HMRC to make additional data requests on individual sellers.

As a result, the number of compliance enquiries HMRC have completed into overseas online sellers is not directly related to the number of individual data requests. In 2020-21, where there has been a significant reduction of individual data requests, the number of actual enquiries completed has increased from just under 7,000 in 2019-20 to more than 9,400 in 2020-21 so far.

Where, following compliance enquiries using bulk or individual data and other information, HMRC have made an online marketplace liable for the future VAT of a non-compliant seller, the marketplace has the option instead to remove that seller and prevent them from selling on their platform. This significantly disrupts the trade of that non-compliant seller.

Number of data requests

In order to inform enquiries about potential non-compliance by overseas sellers on online market places, HMRC send both bulk and individual data requests to online platforms. The number of bulk requests and individual requests on sellers using their service in each of the tax years specified are:

HMRC did not make data requests prior to 2016, when new powers relating to online marketplaces were introduced. As explained above, with the quality of bulk data improving over time, HMRC have been able to improve their processes in 2020-21 and reduce their reliance on individual data requests while still completing more enquiries.

Revenue measured and sellers disrupted

Rather than ‘VAT recouped’, and in line with other compliance activity, revenue measured by HMRC when using their powers to tackle online marketplace sellers is tracked both in terms of the amount of revenue loss from the Exchequer that has been prevented (Revenue Loss Prevented, RLP) and the amount of VAT assessed and collected (Cash Collectable, CC). For this compliance activity, HMRC also track the number of non-compliant overseas sellers disrupted following removal from an online marketplace platform.

HMRC began using the new powers introduced by the Government in September 2016 (and so no results are available for 2015-16). While HMRC started to disrupt non-compliant sellers in the first year the powers were introduced, results are primarily seen after compliance cases were concluded, starting in 2017-18. For the years requested, from 2016-17, the results are:

Officials working on the activity

Rather than the number of Full Time Equivalent (FTE) employees deployed at a specific point in time on this compliance activity, HMRC track this using Staff Year Usage (SYU), which shows the resource used averaged out over a financial year.

In total in 2019-20, HMRC used 176 staff years on this activity. Year to date in 2020-21 (end of January 2021), HMRC have used 150 staff years on this activity.

HMRC expect to use the same level of staff years on this activity in 2021-22.