The payments market continues to evolve in response to technological developments and changes in consumer behaviour. ‘Buy now, pay later’ offerings have soared in use, and while consumers may think it’s just another payments service, the terms entered into between the parties suggest otherwise, leading to potential VAT issues. Online platforms have also begun offering virtual currencies. It remains to be confirmed whether they are in currencies in name only, but this and both platform/user and user/user transactions also require further consideration for VAT purposes. This, against a backdrop of the UK and EU reviews of the financial services exemption, suggests further technical change will follow.
Covid-19 has accelerated the trend for consumers to increasingly digitise how they live, work and play. In response, web and app-based platforms, fintechs, traditional and high-growth retailers are all developing new ways to attract and retain consumer spending in this area through ‘buy now, pay later’ and virtual currency offerings. In view of disputes over how payment services are treated for VAT purposes, this article considers how these new market offerings fit into the wider VAT picture.