HMRC’s consultation on VAT ‘split payments’

HMRC is consulting until 30 June 2018 on a new VAT collection mechanism for online sales allowing VAT to be extracted directly from transactions at the point of purchase known as ‘split payment’. HMRC’s view is that the merchant acquirer is likely to be the best party to effect the split of VAT from the gross payment (with card issuers or banks as a fallback options). During a setup stage HMRC could create a list of fit and proper acquirers which card issuers would check for each transaction before deciding either to release the full payment or make the split themselves. HMRC would then credit the merchant’s VAT account with the amount received from either the acquirer or the card issuer. Three options are considered for the amount of VAT to include in the split: a standard rate split; flat rate scheme; or net effective...