Split payment for online sales

The government is consulting on how a split payment system could be used to combat online VAT fraud. This would use payments industry technology to collect VAT on online sales and transfer it directly to HMRC.

The government considers that the merchant acquirer is likely to best placed to effect the split of VAT from the gross payment. Card issuers or banks would act as safeguards if for example the merchant acquirer is outside the UK and does not meet the criteria for effecting the split or does not make the split.

The process would entail HMRC creating a list of acquirers and payment service providers that card issuers would check for each transaction before releasing the full payment. The acquirer would then split the VAT from the payment and remit it to HMRC. The Revenue would credit the merchant’s VAT account with the amount received...