UK VAT Split Payments: HMRC Reengages with Payment Providers After Successful 2024 Trials
Following two successful Proof-of-Concept projects earlier this year, HM Revenue & Customs (HMRC) is renewing its collaboration with payment technology companies and related providers to tackle VAT fraud in foreign e-commerce. These initial trials, conducted in 2024, demonstrated the effectiveness of using split payment mechanisms to ensure VAT is correctly collected and remitted, boosting confidence in this approach.
Split payments involve separating the VAT component from the merchant’s sale proceeds at the point of transaction, directing it straight to HMRC. This method helps reduce the risk of fraud, particularly in cross-border e-commerce where VAT collection can be complex and prone to evasion.
The Proofs-of-Concept provided valuable insights into how payment platforms can integrate split payment systems seamlessly, maintaining smooth user experiences while improving compliance. Encouraged by these outcomes, HMRC is now actively reengaging with payment providers and companies specialising in payment processing technologies to expand adoption.
Adopting split payments within transactions promises a more transparent and efficient VAT collection process. It benefits both merchants, by simplifying their tax obligations, and the government, by safeguarding public revenue from fraudulent practices — a key priority given the rapid growth of international online sales.
As this collaboration progresses, UK businesses and consumers can anticipate more secure and compliant payment processes aligned with HMRC’s objectives to tackle VAT fraud effectively.
The latest update confirms HMRC’s commitment to modernising VAT collection and working closely with industry partners to create robust solutions for the evolving e-commerce landscape.
Source: UK VAT split payments foreign e-commerce fraud update
Author: @Richard_Asquith
