The £27 Billion Online VAT Fraud

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.

Our Campaign

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.

Continue reading →

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.

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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

Continue reading →

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.

Continue reading →

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.

  • Nathaniel

    Well done, It is good to see that someone has the brains and ability to look into this type of fraud and come out with the truth. Ebay and Amazon are aiding and abetting criminal activity on an industrial scale to the detriment of the UK and the EU, while Paypal are money laundering from the UK and EU to Hong Kong.

  • Nev

    Great website – I can’t believe HMRC just sit back and watch £billions to be laundered out of the UK when the UK public purse is being cut in every direction.

    Totally unbelievable.

    Its not exactly difficult to spot VAT fraud on eBay & Amazon….

  • http://ebay Brian

    Here is another good example on ebay, username saleall2100 with a turnover of £2,000,000 openly admit not VAT included. So that is another £400,000 of lost VAT every year. I wonder how many new nurses and Doctors that would pay for.

    • vatfraud

      Yes – £158,569.97 of sales in May on eBay.co.uk – that’s about 1 nurse a month in VAT Fraud

  • Sandoz

    Thanks for this action, waiting for the petition to be online.
    It would be a good idea also to provide instructions how we best report VAT evading sellers. Each seller should send an official letters to the HMRC, if they receive tons of complaints they cannot further ignore this.

  • Dave

    petitions website is now open again! lets get this show on the road! Ive got some sellers on amazon that i would like to provide if you require, mainly chinese but UK as well.

  • Stew

    The economy and the government are losing NOTHING. The government just overtaxes and steals the money from the public REGARDLESS whether or not China is evading taxes. That little amount of money will save NOTHING. You honestly believe in your little mind that 1.4 trillion could EVER be paid off? Man are you people brainwashed! Any amount paid by the debt slaves go to BANKERS AND INTEREST YOU IDIOTS!

    • vatfraud

      I’ve just made all my staff redundant & lost my warehouse because my company can’t compete on a level playing field. My company pays VAT. My competitors evade VAT.

      My competitors are laundering money out of the UK into China via Paypal.

      Sorry for being an idiot, but I’m not sure how the UK economy and the government are losing nothing.

      I do agree we have been turned into debt slave by the government

  • Serge

    Every action has a consequence…

    With recent bashing of tech companies and their tax arrangements, don’t be too surprised if the likes of Amazon and eBay just open the flood gates (which they have) and let the relevant in-country tax authorities be overwhelmed sorting out the labyrinthine VAT arrangements across the EU.

    Hats off to the Chinese for using this loophole…if the tables were turned…we would be doing the same!
    Can’t really blame eBay, Amazon and Paypal either, since they they will do what they can get away with…change the rules…great, another tax hoop to jump and another loophole in the process!

    No matter which sector you look at, the Chinese have, and always will, play the long game…generational with elephantine memories of past mercantile injustices.
    So when you put it in that context, VAT = Opium payback!

    Your campaign is gallant and noble, however, it is misguided since your not going to get much traction from HMRC, until the political will is changed on this front. As far as most Western governments are concerned it keeps inflation low and widens the pool of “stuff” ever larger with each passing season – modern day bread and circuses!

    Better off expediting your energies on the political front and reduce/eliminate the VAT tax rules imposed by Europe…Keep It Simple Stupid!

  • vatfraud

    We’ve just installed a new Disqus discussion system to get your views on the Petition & what needs to be done to Stop the VAT Fraud on eBay & Amazon by Chinese, NON EU & UK businesses

    • Physiocrat

      What needs to be done? Scrap VAT.

  • Dipen D

    I have reported the method and hundreds of sellers to HMRC but they are not interested and have done absolutely nothing since I reported them over 2 years ago.

    The Fraud:

    (1) Chinese sellers send their goods to a UK fulfilment warehouse. Let’s
    say the goods are valued at a £100,000, they will declare the value at
    £10,000 so they will pay input VAT of £2,000 rather than £20,000.

    (2) They then sell these goods on ebay (same is true with Amazon) and
    when they are sold the sales revenue goes to their HONG KONG paypal
    accounts. However, some sellers are clever and have UK paypal accounts
    as well and will show some revenue in their UK paypal account.

    (3) So, in our example above, let’s say the final sales value for the
    £100,000 of goods is £200,000 the Chinese seller will pay VAT on, say,
    £20,000 of sales shown in their UK Paypal account and will pay NO VAT on
    the HONG KONG paypal account which has the £180,000.

    (4) From the HMRC’s point of view, this is what’s happened:

    (a) Input VAT of £2000 was paid and reclaimed by the seller

    (b) Output VAT of £3,333 is paid to HMRC on the sales of £20k in the UK paypal account

    (c) HMRC is defrauded out of £30,000 of VAT on the £180,000 of sales from that went into the Hong Kong Paypal account.

    Competition:

    Remember, as a UK seller it is impossible to compete against the Chinese
    sellers as they make an additional 20% margin on what a UK seller would
    make.

    Ebay’s Response:

    “We know about this”. Remember, ebay are the ONLY ones not losing out on
    this because they get their ebay selling fees and they also get their
    paypal fees and if anything Ebay is facilitating this whole fraud for
    the overseas Chinese sellers.

    HMRC’s Response:

    This was interesting and I will summarise how they responded when I spoke to them on the phone:

    We are aware of this fraud that is happening and are working with ebay
    If you give us names of sellers this could be a threat on your life
    as the sellers may come after you so do this at your own risk !
    We cannot work with you on this as everything we do is confidential
    In a nutshell, it seems like the HMRC would prefer to go after
    bigger guns like corporates and UK sellers than to pursue large ebay
    sellers who are defrauding them of VAT. I provided the HMRC and eBay with the sellers evading VAT and, as you may have guessed, they are all still trading on eBay and the HMRC have just ignored my evidence.

    • Samy Alsh

      hey, interesting, how do you find out on amazon who is paying or who is legit registered ? thanks

      • Joe J

        You don’t. The overseas seller isn’t obligated to post the VAT info. This person is just assuming that they are in violation. They probably are- but he doesn’t know that.

      • Lerp Lrp

        Easy. You look at the listing, go down to ‘Sold by’ then click on the seller’s name. Up pops the sellers address and (if applicable) VAT details. This is true of sellers both from the UK and outside the UK.

    • Physiocrat

      Scrap VAT. Problem sorted.

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  • Physiocrat

    All this shows is that VAT is not fit for purpose. It is time it was scrapped.

    If you take into account the costs and losses, getting rid of VAT would leave a gap of, at the most, one-third of the headline figure collected. Ditching VAT could even leave the exchequer better off. Swedish experience of cutting VAT from 25% to 12% in the restaurant sector in 2012 was that thousands of additional jobs were created.

    The losses due to VAT come under four main headings.
    1 Churning
    2 Administration and compliance
    3 Deadweight losses
    4 Abstraction from other taxable revenue streams.

    • Same Old

      No chance unless its replaced with somewthing else …VAT is one of the top sources of income for Govt.

      • Physiocrat

        You have not checked out the losses under those four headings, have you?

        The Exchequer would lose, at most, one third of the headline yield. It might lose nothing at all, since more would automatically be drawn in from other taxes. The government would also save as VAT is a major government expense.

        • Lerp Lrp

          Your four ‘headings’ don’t actually mean anything! e.g. how can there be a ‘loss’ due to ‘compliance’? Deadweight? Abstraction?

      • Joe J

        I pity those living in Europe even more so than my own country which is getting more messed up Euothink by the day (USA)- particularly certain regions. The cost of living is insane for you guys and we’re seeing it more and more in the states as European socialism finds its way here. You pay significantly more for everything because of various government instituted programs and serious government associated overhead. My business operates in both the UK / Europe and the US and everything there is significantly more expensive. We’re talking at least twice as much. Our US operating costs are less, our US labor costs are less, our US taxes are significantly less. And humorously our employees in the US are MUCH better off. Our employees here can afford to provide for themselves whereas in Europe everybody is dependent on wealth redistribution schemes and government handouts.

        In New Hampshire where I live we have no income tax, no sales or VAT taxes, and even relatively low property taxes. New Hampshire doesn’t even require car insurance (which has humorously resulted in this state having more insured drivers than any other because of lower insurance prices- try competing with $0 like the insurance companies here have to and the pricing becomes sane and surprisingly affordable which results in more drivers getting insured in spite of not being legally obligated to)!

        Now I’ve lived in places closer to the UK and actually I visited France and the UK several years ago too. I lived in New Jersey which is a high tax socialist hell hole similar although to the same extant (yet) as the UK. The property taxes were insane in New Jersey and while the sales tax was “only” 7% all the taxes combined were resulting in me and my family being deprived of about 70% of our income. Its much worse in Europe and its why you guys are all dependent on wealth redistribution programs to survive.

        In New Hampshire I can afford a very lovely home, two cars and to send my kids to good schools, and even pay for my own health insurance. Not being reliant on the state has some serious perks too. When government doesn’t do something you can because the money remains in your pocket to do it. My low wage employees aren’t reliant on government handouts either and both my current assistant/employee and my last could afford to BUY a house and live comfortably on a $12 USD / hour wage here (about £9) without any government handouts or other socialist programs. How many hours do they work a week? 40.

        If you want to fix these problems you’ve got end the socialism. It’s costly and does little more than add overhead which drives up the costs turning what wonce affordable that and let the people do for themselvesv

        • Lerp Lrp

          Your myopic rant has nothing to do with VAT compliance from non-EU sellers. And very little to do with facts, either. Oh, BTW, my wife is going to a UK hospital for a brain scan on Friday. Already paid for, through UK taxes. My sis-in-law in California needs a knee op but can’t afford it. Yours from a ‘hellish’ place…

          • Joe J

            If you are retarded and don’t have insurance in the United States its your own god damm fault- or that of government- because they’ve deprived you of your assets to get it. Mostly it’s people refusing to take responsibility for themselves. Hell- I’d be shocked if California doesn’t have a socialist program in place to cover your sis-in-law. Of course as complicated as these shitty socialist systems are she probably just can’t comprehend how to get that insurance/coverage because of how complicated it is and how much bureaucracy is involved.

          • Physiocrat

            Not all taxes are equal. Most are a disaster. There is one exception. Look up Physiocrat.

    • Lerp Lrp

      By your logic Physiocrat, traffic lights should be scrapped because some people jump the red light… And, “Ditching VAT could even leave the exchequer better off.” In the absence of any evidence this is just magical thinking.

      • Physiocrat

        How about putting some figures to the four items on the list, to the nearest £10 billion will do. You can work them out if you dig out the material.

  • Katrina

    A much simpler option would be to make the online marketplace responsible for collecting the VAT and paying it over in all cases, even for big established UK retailers that do currently comply with the law.

    • Katrina

      Here is how it would work:

      Amazon would declare it as a sale on their own VAT return, along with all the stuff they sell on their own account.

      If the retailer has a UK VAT registration number, they would charge VAT on the payment Amazon makes to them, about 75% or so of the selling price, which Amazon would claim back, and the retailer would declare this own their own VAT return. Retailers from other EU countries would use Amazon’s VAT number to treat it as a reverse charge sale, declare it on their EC sales list to their local tax authority, and not charge VAT on it. Retailers from outside the EU would not have to concern themselves with VAT.

      Basically it would be the same as if they sold the goods to Amazon and Amazon sold them on to the end customer.

      • Joe J

        It’s still a bad system. The costs of operating in the UK are already insane and you’ve failed to account for non-eBay sellers. Then again that is probably a good thing.

    • Physiocrat

      Even simpler would be to scrap this stupid tax

  • John Paul

    The ebay website has been designed to disguise seller fraud. Initially much of it came from abroad, but now it also has to include the thousands and thousands of individuals who are based in the UK and who are posing as ‘private sellers’ who rather than just selling the odd item of clothing every now and then, has turned it into a daily business!

    Anyone using the ebay app will soon discover that on trying to ascertain the sellers business details from the listing, the webpage will immediately shut down to prevent this from happening.

    And if ebay really wanted to be open and above board then why have they now disguising fraud further even when it comes to seller feedback.

    How can a trader obtain a 100% seller rating on their listing and yet on checking further, have dozens of negative written comments from dissatisfied cusomers who have paid, but never received their goods and of those who have, received nothing more than faulty and dangerous items? Ebay has known for years this has been happening and has done nothing to stop it so perhaps ebay themselves should be directly held liable for all loss of VAT.

    • Physiocrat

      Who the hell cares? VAT needs to be scrapped. The eBay problem is just one more reason for getting rid of this stupid and damaging tax.

    • Joe J

      I’m blown away by how complicated the VAT system is. I’m well educated and have to hire a third party to take care of it. We can’t even operate our own infrastructure because of how complicated it is. This is *NORMAL* for European small businesses. Our US operations are run by us with our own infrastructure, servers, email, web site, etc. Even in New Jersey where things are getting closer to being a socialist hell hole similar to Europe at least I could (before I moved the business out) do the math and file the sales taxes owed to New Jersey independent of any other company/expert. The problem the VAT system isn’t that sellers are trying to skirt the law. It is that it’s too complicated for a small business with a few employees (if that) to follow and the cost of compliance becomes such (because now you have to hire outsiders consultants/experts JUST for the VAT aspect) that following the law puts people out of business. Either you ignore the law and survive or you go out of business. You aren’t stealing from rich wealthy businesses owners here. You are stealing from the working poor.

      • Lerp Lrp

        ” I’m well educated …” but still pretty damned prejudiced! I’ve been VAT registered for 30-odd years – couldn’t be simpler! And VAT offices are surprisingly approachable and helpful these days (they used not to be). Try not to be ‘blown away’ Joey – you never know where you might land.

        • Joe J

          Christ- you do understand that not everybody is operating a local business. Some of us operate small businesses that deal with people all over the world. What seems simple to you if it were the *ONLY* system becomes highly complicated when you take into account a bunch of different factors. For instance if you are a small business and do a small amount of business in a given jurisdiction/region. You can’t afford to waste time calling or visiting the UK/Europe/etc or pay someone 5 grand a year to do it for you when your not making that much in the given region. Now do this repeatedly in every jurisdiction/region. VAT does get complicated for some even if it isn’t complicated given your particular business / operations / etc. If I was operating a small store from my home and only operating within the EU and just re-selling one thing it’s not going to be the end of the world. I’d hire whoever it is and pay them the money to deal with it. Reality is verify different and the VAT system sucks.