We have been campaigning against VAT Fraud by Overseas Online Retailers since 2014. HMRC’s own estimate of the fraud is £1.5 billion in lost VAT a year. This equates to £27 billion in lost sales revenue & additional taxes to UK businesses and the public purse in the last 3 years.
The number of overseas online retailers who have registered for VAT has risen from 700 in 2015 to 43,500 by the end of August 2018.
HMRC has only received £150 million in VAT from Overseas Sellers up to 30 June 2018. HMRC have made assessments of £160 million from over 1000 joint and several liability notices. HMRC hasn’t mentioned how much of the £160 million has been recovered. This equates to £37 million a year and represents only 3.89% of what should be collected.
HMRC has allocated £22.5 million over the next 5 years to tackle the fraud.
Even with the latest round of new policies and legislation, HMRC are still way behind the curve on what needs to be done and must up their game massively. The situation is so out of hand now, that even the VAT evaders are finding it impossible to compete because there are so many of them on Amazon & eBay.
Until the playing field is well and truly leveled, we will carry on campaigning. Here is what needs to be done:
Seize Stock, Freeze Funds & Block Listings
HMRC has not seized a single item of stock, frozen any funds or blocked any listing from VAT evading overseas retailers using Amazon UK warehouses.
HMRC must seize all stock, freeze funds and block all listing on Amazon from any seller that has been found evading VAT. These sellers are simply removing their stock, setting up new companies, sending their stock back to Amazon and selling it on their old highly ranked listings. Thus avoiding paying any of the undeclared VAT from their old company.
Strengthen Online Marketplace Seller Checks
HMRC’s Online Marketplace Seller Checks do not go far enough and have huge loopholes being exploited by Overseas & UK Sellers.
At present Online Marketplaces such as eBay, only check that an Overseas Sellers VAT number is valid and matches the business name. eBay is not required to check if the seller is the actual legal owner of the VAT number & business name.
Make All VAT Registered Non-Eu Overseas Online Retailers Appoint Fiscal Representatives
Non-EU Overseas Online Retailers who hold stock in the UK are totally out of reach from prosecution by HMRC under the current laws. They are safe in the knowledge they can simply disappear without paying any undeclared VAT and reappear under a new company without any risk of being prosecuted by HMRC.
£865 million or 96.11% of VAT is still going uncollected from Non-EU Overseas Online Retailers.
HMRC must make all Non-EU Overseas Online Retailers appoint a Fiscal Representative and Bank Guarantee
Stop Duplicate Accounts & Listings on eBay
Joe Billante told the PAC that sellers can’t operate multiple accounts if they are selling the same products in the same categories and that eBay have internal systems in place to ensure compliance.
However eBay is allowing sellers to operate multiple duplicate accounts with multiple duplicate product listed in each account.
The PAC must hold Joe Billante & eBay to account & ensure all duplicate accounts on eBay are closed.
Stop the Royal Mail subsidising Chinese Retailers post
Chinese Retailers are being offered hugely subsidised postal services by the Royal Mail, allowing them to sell goods (including postage from China to the UK) for less than the stamp would cost a UK retailer to send the same item to the same UK customer.
This needs to stop! This is killing UK online retailers & the High St.
Online Marketplaces Must Display Seller & Stock Location
Online marketplaces must clearly display the location of the seller and their stock on all product page next to the “buy now” button and throughout the checkout process.
Prices must clearly display whether it includes or excludes VAT. If a product is located outside the UK, consumers must be told that import tax and duty will be payable upon receipt of goods.
eBay Business Seller Accounts linking to Paypal Accounts
Currently an eBay business seller account can be linked to a completely different company’s PayPal account, allowing them to channel all their sales out of the UK without paying VAT or Tax. eBay accounts must only be linked to PayPal accounts that are registered to the same business.
Scrap Split Payment Model
HMRC has already had negative responses from payment services providers who pretty much reject the idea. Payment Service Providers pointed out to HMRC that not only was it potentially costly and complex, it was also illegal under current law.
Quote from Electronic Money Association (EMA):
“We do not agree that a VAT split payment model is the most cost-efficient way to recover unpaid VAT. This system would take a significant period of time to build, and is highly likely to cost several times more than the VAT HMRC estimates can be recovered through this model.”
HMRC should scrap the idea forthwith and stop wasting any further taxpayers money on the idea.
Scrap LVCR – Low Value Consignment Relief
LVCR is a relief from VAT on goods imported into the EU with a value of £15 or less. Goods dispatched by Overseas Online Retailers from outside the EU to customers in the UK can be sold VAT free as long as they are valued under £15. Overseas Online Retailers are abusing LVCR by under declaring the value of the goods so no VAT or Duty is paid.
Introduce Destination based VAT System
The UK must adopt the proposed changes to the EU VAT system. The new system means that VAT is paid to the country where the customer is located, including distance sales. If an Overseas Online Retailer dispatches goods from China to consumers in the UK, the Overseas Online Retailer will have to register for VAT. They will then have to declare and pay the VAT and Duty to HMRC. This could generate £billions of extra revenue for the UK. VAT Fraud could be easily spotted by requesting retailers sales data from Online Marketplaces.
Introduce Third Party Liability for Fulfilment Centres warehousing Non-Compliant Goods
Currently Fulfilment Centres such as Amazon can warehouse & fulfil orders of non-compliant goods for Overseas Overseas retailers without any liability. This needs to be changed. All Fulfilment Centres must be held equally liable for Non-compliant Goods and ensure that all stock in their warehouses comply to EU & UK regulations such as:
• Non-compliance with the consumer safety legislation associated with the CE mark
• Non-compliance with extended producer responsibility legislation for waste electricals, waste batteries and waste packaging
• Non-compliance with other product related legislation such as ROHS, REACH, and the requirements of the Energy Related Products directive.