HMRC handed out 7,185 VAT numbers to Overseas Online retailers!!

HMRC have just released a press statement “HMRC tackles online VAT fraud in time for Christmas. They have handed out 7,185 VAT numbers to Overseas Online retailers in the last year, that’s a tenfold increase in last year’s figures of 695 due to their crackdown of Online VAT Fraud.

However reading between the lines is seems to be desperate attempt by HMRC to get some positive PR and be seen doing something positive in tackling the online VAT fraud they have ignored for the past ten years. The press release simply proves Online VAT fraud is enormous with 7,185 previously unregistered overseas retailers deciding to register for VAT.

It’s worth noting our comments in FT & The Guardian on the HMRC news:

The Guardian – MPs poised to investigate VAT fraud on Amazon and eBay
The Financial Times – Online sales clampdown nets VAT registrations

Lets hope HMRC’s next press release is more news worthy such as; “HMRC close down 7,185 oversea’s online VAT Evading retailers on eBay & Amazon” !!

HMRC have some serious questions to answer;

1) How much undeclared VAT has HMRC recovered from these previously unregistered online retailers?

2) How many of these retailers have declared on their VAT registration forms that they have made no previous undeclared sales?

3) How many of these retailers have HMRC asked to appoint a VAT representative or provide a financial guarantee?

4) How much VAT in now being collected from these previously unregistered retailers?

5) How many Joint and Several Liability notices have been issued to eBay & Amazon for non VAT compliant online retailers?

6) How will HMRC monitor these retailers VAT Returns are true and correct?

One must ask themselves is HMRC handing out VAT numbers without any due diligence or investigation into the retailers previous online trading history?

Great PR stunt HMRC – doesn’t wash with us!

Professor Rita de La Feria highlights online VAT fraud, its impacts and potential solutions

The EU Taxation & Customs held a global conference on ‘TAXATION, INVESTMENT AND INNOVATION: A TRIPTYCH FOR BALANCED GROWTH‘ last month

Professor Rita de La Feria keynote speech highlighted our campaign, online VAT fraud, its impacts and potential solutions.

If you missed it you can see it here:

Amazon launches new VAT Compliance Tools for VAT Evading Sellers

Amazon UK have now taken measures to help VAT evading sellers understand what VAT compliance is and whether they need to register for VAT.

They have teamed up with KPMG who have provided an online “VAT registration litmus test“.

We tested the tool and there seems to be some flaws in it. It doesn’t work for NON EU companies (Chinese) with EU stock as it doesn’t ask where your business is located. It also says that you need to hit the VAT threshold before registering for VAT. There is no VAT threshold for NON EU companies. We find the tool completely confusing to use with a very badly designed results page. Hope KPMG are better accountants than web developers.

Perhaps they should think about renaming it from “VAT registration litmus test” to “VAT registration ambiguity test”!!

We launched our own simple test “Am I committing VAT Fraud in the UK?” several years ago. OK we haven’t spent much on it but it does work for NON EU companies. It’s not rocket science!!

We are very sceptical about the reason why Amazon are now doing this. It’s certainly not because they have a moral conscience for being part of the £7.5billion hole they have caused to the UK economy and online businesses. Amazon are only doing this to protect their own revenues and shareholders.

Is Amazon’s time is numbered? Is the noose tighten around their necks for being part of a fraudulent supply chain? They know the main bulk of their European fulfilment operation is built around dispatching goods for Chinese VAT evaders. Amazon’s bottom line is going to take a major hit once the VAT evaders are shutdown.

The only reason why Amazon have been able to get away with it for so long is because of HMRC’s complete incompetence in shutting this fraud down. We have seen a whole host of new policies and announcements but have seen very little action in actually shutting down these VAT evaders on Amazon & eBay. HMRC needs to up their game.

Lets hope the EU & UK take Amazon to court and make them liable.

Here is the headline that appeared on Amazon Seller central:

New Tool and Resources Page for VAT Information

23 Nov 2016
Selling your products on the UK and other Amazon European Marketplaces can help you grow your business. To set up your business for international success, one of the important considerations to keep in mind is how you manage Value Added Tax (VAT). If you’re selling into an EU country from outside EU, it’s essential to be aware of any potential VAT requirements.

Take the newly launched Litmus Test to assess your VAT registration needs

To make compliance easier, it’s important to know which specific countries you’re selling into, and to have an understanding of their requirements in those countries. The VAT rules for every EU country are different. But there are some basic factors that will help determine whether you will have to register for VAT within a certain country, including:

• Where you are based/established
• From where you ship goods into this country
• Where your customers are based
• Whether your customers are consumers or businesses
• The level of your sales

You have a specific example in mind and don’t know if you need to VAT register or not? Take Litmus test and find out now (https://litmustest.kpmg-vat-compliance.com).

Visit our new VAT resources page to learn more about VAT compliance requirements

There are some precise steps you’ll need to take to register and file your VAT returns. As an example, here’s what someone selling into the United Kingdom would need to do to be compliant:

• Register for VAT
• Charge the correct amount of VAT to UK customers at checkout and issue correct invoices where required
• Submit your VAT returns by the due date
• Pay any VAT due to HMRC
• Keep proper VAT records

This is just an example of the steps required in one country — while the general process is similar elsewhere, you’ll need to have an understanding of each country’s requirements before you start selling to customers located there (and charging them VAT). Visit our VAT resources page (https://services.amazon.co.uk/services/fulfilment-by-amazon/vat-resources.html) to learn more about VAT compliance requirements in the UK.

Autumn statement tackles VAT Fraud via Fulfilment Houses

The government has just announced in the Autumn statement the Implementation of the Fulfilment House Due Diligence Scheme in 2018 to tackle VAT fraud by overseas businesses selling goods via online marketplaces.

Lets hope Amazon Fulfilment will be held liable of all VAT Fraud being committed from its warehouses. Amazon “Should have known or would have known!!!”

In addition to that the government have given Customs and excise officers new powers to inspect goods.

Full statement here:

4.3 Implementation of the Fulfilment House Due Diligence Scheme

As announced at Budget 2016 and following a consultation on the scope and design of the scheme, the government will legislate in Finance Bill 2017 to introduce a new Fulfilment House Due Diligence Scheme in 2018. This will ensure that fulfilment houses play their part in tackling VAT abuse by some overseas businesses selling goods via online marketplaces. The scheme will open for registration in April 2018.

6. Avoidance and evasion

6.2 A penalty for participating in VAT fraud

As announced at Budget 2016 and following consultation, the government will legislate in Finance Bill 2017 to introduce a new and more effective penalty for participating in VAT fraud. It will be applied to businesses and company officers when they knew or should have known that their transactions were connected with VAT fraud. The penalty will improve the application of penalties to those facilitating orchestrated VAT fraud. The new penalty will be a fixed rate penalty of 30% for participants in VAT fraud. This will be implemented following Royal Assent of the Finance Bill 2017.

6.3 Power to examine and take account of goods at any place

The government will introduce legislation in Finance Bill 2017 to extend the current customs and excise powers of inspection. This will amend the Customs and Excise Management Act 1979 and enable officers to examine goods away from approved premises such as airports and ports, to search goods liable for forfeiture and open or unpack any container. This will take effect from Royal Assent of the Finance Bill 2017.

Amazon UK bans incentivised reviews

Amazon have just updated their Review policy on Amazon UK & EU. No more free giveaways in exchange for a review.

Chinese  Seller using this technique to boost their product ranking and sales.  Seem’s like Amazon are taking review manipulation seriously.  Shame they don’t take VAT Fraud seriously.

Since Amazon’s announcement yesterday it seems that the mass of Amazon Review Facebook groups have already found a way round the new rule:

reviews

Here is the headline in Amazon Seller Central:

Additional information about incentivised review policy
22 Nov 2016

Amazon recently updated its policies to prohibit incentivised reviews, including those posted in exchange for a free or discounted copy of the product.

We consider a review to be incentivised if you have influenced or can influence the review directly or indirectly, including by monitoring whether a review is written and providing or withholding any future benefit based on whether a review is written or the content of the review. Below are a few examples where a review is considered incentivised and is not permitted:

  • You provide a free or discounted product, gift card, discount, cash payment or other compensation in exchange for the review.
  • You provide or withhold free or discounted products or other benefits in the future based on whether the buyer writes a review.
  • You use a review service where reviewers’ continued membership depends on writing reviews.
  • You use a review service where you can rate buyers based on their reviews.
  • You use a review service where customers register their Amazon public profile so that you can monitor their reviews of your products.

Incentivising customer reviews violates our policies and may violate the Federal Trade Commission Act.

The following actions are generally allowed, provided you comply with the above restrictions:

  • You may offer discounts that are generally available to all Amazon customers, such as Lightning Deals.
  • You may give out free products at trade shows, conventions or other similar venues where you are unable to monitor whether the recipients write a review or provide or withhold any benefits based on whether a review is written or the content of the review.

The above changes apply only to product categories other than books. We continue to allow the age-old practice of providing advance review copies of books.

£7,500,000,000 in lost revenue for UK companies, due to the online VAT Fraud that HMRC are failing to stop

The Rt Hon David Gauke MP announced that online VAT fraud accounts for up to £1.5billion of the total VAT gap. However it’s costing a lot more than that; £1.5billion of evaded VAT equates to £7.5billion in lost sales revenue for UK companies.

These UK companies are the ones funding HMRC and paying the £2.4 million pension pot for the most useless ex CEO of HMRC ever; Lin Homer.

The missing £7,500,000,000 is ending up in Chinese bank accounts without any VAT being paid. It’s also completely disappearing from the UK economy with no benefit to anyone other than the VAT Evaders and Amazon & eBay shareholders who are profit from vat fraud.

No corporate tax is being paid on the profits of the missing £7,500,000,000, no PAYE or NI is being paid on staff wages, no staff wages are being paid, no rent is being paid to landlords, no warehouse rates are being paid to local councils, no money is being spent on office furniture & equipment, no tea is being bought for the office, no pay packets are being spent down the local boozer on a Friday night, no kebabs are being bought at the end of the night and no taxi fares being paid to get home.

Instead, UK companies are going bust, staff are being made redundant, warehouses are being left empty, mortgages are going unpaid and the UK benefits bill keeps rising to astronomical levels.

These UK entrepreneurs have paid more Corporation tax than Amazon & eBay have ever paid.

We met with The Rt Hon David Gauke MP on 30th October 2015, who at the time was Financial Secretary to the Treasury, but has now been promoted to Chief Secretary to the Treasury.

At the time of our meeting he was completely unaware of this multi £billion Online VAT Fraud. He listened to us and got the wheels in motion with new legislation. We think our press coverage & meetings with the Heads of the EU VAT Unit helped.

However HMRC are still woefully slow and way behind the curve in taking effective action. HMRC are putting UK entrepreneurs out of business and are having a catastrophic effect on the UK economy as they fail take action against the VAT evading sellers.

HMRC are now issuing thousands of VAT numbers to NON UK sellers who have been evading VAT for years.

HMRC have failed to make a single prosecution for Online VAT Fraud in the past 5 years.

How much more pain do UK businesses have to suffer before HMRC take decisive action and stop the very crude and easy to spot fraud?

By allowing VAT Fraud to continue HMRC has created a huge market distortion in unfair competition and pricing for UK businesses. HMRC are responsible for allowing the marketing distortion to continue.

The key principle of the EU VAT Directive is that Member States (HRMC) are obligated to prevent VAT evasion, avoidance, and abuse to maintain non-distortion and fiscal neutrality of the market.

HMRC are clearly in breach of this principle and need to be held to account for the damage they are causing.

How much longer do UK businesses have to wait for HMRC to level the playing field?

erer

UK Sellers v Chinese Sellers Rugby Match. eBay & Amazon staff & shareholders are cheering China on. HMRC are refereeing & the linesmen. Guess who is paying for the match and which side UK Sellers are on?

Here is The Rt Hon David Gauke MP full statement after the 2016 March Budget:

(Quote from HMRC Fulfilment House Due Diligence Scheme.PDF)

“The growth in online shopping has meant the average UK consumer can get goods faster and cheaper than ever before. According to a recent British Retail Consortium report, more than 20 per cent of non-food retail spending occurs online in the UK. This growth in online e-commerce has benefited the wider UK economy but has also left it open to severe abuse.

Non-EU traders who sell goods (located in the UK at the time of sale) to UK consumers, mainly via online marketplaces, are not always paying the correct VAT and duty to HMRC. These goods are normally shipped to the UK prior to sale and stored in fulfilment houses close to their final delivery point. This abuse has grown significantly and now accounts for £1-1.5bn of the total VAT gap. These overseas traders are unfairly undercutting all businesses trading in the UK, abusing the trust of UK consumers and depriving the government of significant revenue.

The government has announced at Budget 2016 a comprehensive package of measures to disrupt and deter this 21st century fraud. We are targeting non-compliant overseas traders themselves by making them appoint a UK tax representative who will be liable for their VAT and/or seeking a security. If these traders fail to comply and online marketplaces do not help stop the abuse occurring, the online marketplaces themselves will become jointly and severally liable for the unpaid VAT. We will be working with international partners to try to develop solutions to this problem that affects all major economies. Work has already begun on engagement with the EU and OECD on this matter.

The Fulfilment House Due Diligence Scheme complements the above measures, equipping HMRC with the tools it needs to tackle this fraud. The government will make sure fulfilment houses who are part of this scheme perform proper due diligence on the goods that they fulfil. This will ensure that HMRC can target those traders who use this business model to undercut legitimate business and protect revenue.

This consultation will ensure we minimise as far as possible the scheme’s impact on legitimate firms that import goods. It is therefore crucial that any business that is involved in storage, breaking bulk, unpacking, re-packing and/or subsequent delivery to customers of imported goods responds to this consultation. I hope that you take the time to respond fully. Your responses will help us to ensure this scheme is designed in a way that best meets its objectives, including ensuring the costs faced by firms are minimised.”

Amazon’s Second Letter Warning Chinese Sellers to become VAT Compliant

Further to our report yesterday. It seems Amazon have sent out a second letter warning Chinese sellers to register for VAT.

This news article on was published on the 1st November 2016 on Chinese website www.ebrun.com.

We’ve used Google to tranlate it:

Amazo second letter VAT warning letters you received it?

amazon

Yesterday, many sellers reflect receive Amazon message, the second official warnings need to register VAT. Compared to the first reminder VAT registered, the Amazon’s attitude is more like the last notification: VAT registration is imperative, the platform is likely to close the VAT regulations do not meet the HMRC account.

We analyze the content of messages, Amazon express what information:

1, the United Kingdom (UK) value added tax (VAT) further regulations came into effect on September 12, 2016. The new Act came into force, which means that the UK’s Revenue and Customs (HRMC) have a greater right to dispose of overseas sellers to evade VAT, VAT compliance check has begun, your VAT job done right, it is sufficient to deal with inspection;

2, if the Royal Tax and Customs (HMRC) believe a seller may exist non-compliance, Amazon seller account data need to be selected in accordance with the requirements to disclose.

What is the situation of non-compliance? The first is not yet registered VAT, Amazon has said that the first reminder: June 30, Amazon’s British Grand Prix seller must submit a VAT tax number in the background, otherwise it would not rule out the risk of facing title; followed by a VAT registered but did declaration has been made or done zero reporting, underreporting sellers; in addition, each VAT tax ID information requires a consistent and sellers Amazon account information so that multiple accounts sharing with a VAT tax number not only illegal, but also may lead to an account associated with so do not borrow another VAT tax number; in addition, the use of false heading clearly is non-compliant.

3, HMRC can now issue a notice to the Amazon store. That is, HMRC can not seek to inform the implementation of the Amazon seller list, and the right to turn off corresponding to the Amazon store. At the same time, HMRC the right to request platform jointly and severally liable. In order to avoid hefty fines may cause joint and several liability, Amazon seller inevitable combating tax avoidance.

4, in order to avoid illegal VAT account is disabled due to the risk, the seller should take appropriate action as soon as possible. VAT registration has not been completed, you should promptly consult a tax official, as required;

5, should be entered in the VAT code available immediately to the seller Amazon seller account information in a timely manner to the Amazon filing VAT, the VAT does not provide information to avoid being in the background HMRC action.

In fact, China’s Amazon sellers VAT really worry about nothing more than two points. The main thing has been the low-cost advantage will be deprived of, worried about the situation of decline in cross-border transactions. But this, sensible seller said, although the tax compliance of the pain, but the industry can take to eliminate the price war atmosphere, clean-up of cross-border electricity supplier has long accumulated tax issues, helps the internationalization of Chinese brands. Another point of concern is that if the VAT is not compliant, really lead to the account being closed, which is the seller want to see the solution as soon as possible by the VAT is still regulatory compliance operations.

It is reported that most of the British Grand Prix is ​​already underway VAT registered seller and subsequent tax returns in this small series to remind the seller to protect their VAT accounts, industry sources told Tracy: If freight shipments heading VAT borrow seller, the seller C79 proceeds big tax bills, but a small quarter sales of items when reporting, it may be the Inland Revenue Department came to the door.

But not before VAT registered seller, not only during the peak season to be grappling with may be checked, but also distracted to register, as performed earlier.

VAT is a popular trend, Amazon is also committed to move more compliance-oriented platform. The seller should pay attention to this matter, because if you neglect cause really account was closed, it was a rude awakening.

eBay Announcement on VAT compliance for overseas sellers is being picked up by Chinese News.

Some interesting news coming out of Chinese News Networks. Seems the latest eBay News Announcement on VAT compliance for overseas sellers is being picked up in China now.

Chinese News website www.ebrun.com has just (November 15th 2016) published this eBay sellers Note: Failure to follow the rules of VAT account will be frozen.

The article is in Chinese. The best way to view it is use Google Chrome which will automatically translate it. We have the translated version below. (Slightly pigeon English) :

EBay recently sent a message to the seller tips, sellers have received it.

VAT is about the new trends in the UK, as the e-mail notification under the ultimatum issued last month, Amazon sellers VAT secondary warning, as to not follow the rules of the seller.

Earlier this year, the British government for non-payment of VAT, but the seller of goods overseas in the UK turnover of the introduction of a new program. eBay worked closely with the British Inland Revenue (HMRC), to ensure that the seller VAT compliance. If the British Inland Revenue a notice of non-compliance sellers VAT receipt, eBay will take response measures, until the account permanently frozen.

Currently eBay has contacted hundreds of overseas sellers to inform and assist the completion of the audit, and continuing obligations to notify the seller. The e-mail notification, eBay warned sellers are very strict, if your VAT non-compliance, which should pay attention to it. VAT no account of the seller, must be promptly registered account. UK VAT registration, to be honest disclosure of information they need to the British tax authorities, and the British tax authorities claim the timely payment of VAT before tax in line with their VAT registration VAT regulations.

Registering an account, and not bin, timely and accurate tax return is also crucial. If intentional delays, errors or false declaration, may be subject to HMRC goods seized, if HMRC reported to eBay, will lead the account freeze and fines. But if you use a single VAT number in multiple eBay accounts, eBay would think these accounts belong to the same operator or a company may cause the associated account.

If by December 1 sellers still can not provide their own VAT number, but still uses the British Overseas warehouse delivery. So, use your overseas warehouse is not consistent with the requirements of the UK tax law, illegal operations. It is worth noting that not only eBay, Amazon, AliExpress VAT policies are implemented.

June this year, Amazon also issued a message to remind the British Grand Prix seller must submit VAT tax number in the background, it may face the risk of title; in October the Amazon in the same way again warning sellers to be registered VAT.

British VAT and AliExpress in September infos notice has been given to the British Overseas warehouse seller, if there is no VAT tax number on September 22, you will not be entitled to publish any country overseas warehouse merchandise, and the seller sent a unified platform goods provided for review by the British products do not deal with.

Either eBay or Amazon, AliExpress, the seller should be clear there is no free lunch, the intention to do sellers know that VAT is a general trend.

This, eBay is also a trend of VAT to the seller, made a prompt, want to play overseas warehouse seller, must play by the rules, escape is not a permanent solution.

Xiao Bian remind you: no VAT account eBay sellers British Overseas warehouse, quickly hands register now. Now is the season, not because of neglect caused by VAT account is permanently frozen

Latest Headlines on Amazon Seller Central – UK VAT Regulations

Today Amazon published new headlines in Amazon Seller Central about the VAT Regulations for Online Marketplaces. It seems the net is closing on VAT Evaders.

We are hoping this is a sign that HMRC are now taking action against the sellers and issuing take down notices to Amazon.

Here is the Headline:

UK VAT Regulations: Important Updates
3 Nov 2016
We are writing to inform you that further United Kingdom (UK) Value Added Tax (VAT) legislation which may affect you was enacted on 12 September 2016.

What is the impact of the new legislation?

HMRC is tracking VAT compliance, and under UK law, Amazon is required to disclose to HM Revenue & Customs (HMRC) select seller account data on request if HMRC believes a seller may not be compliant.

Under the new legislation, HRMC can now inform websites such as Amazon Marketplace if it believes a seller is in breach of VAT regulation and require that we stop the seller from selling through Amazon.co.uk and that we remove the account.
As per Amazon’s Terms and Conditions, sellers on Amazon must comply with all applicable laws including VAT regulations.

How to avoid potential interruptions of your online business?

If you have any questions about your VAT compliance, we recommend that you consult with your tax advisor now to understand your VAT obligations and take appropriate action to avoid any risk of your account being suspended due to VAT non-compliance. If you would like to refer to a list of tax advisors who can provide additional guidance, including discounted VAT consultancy rates available for Amazon sellers, please visit our VAT page.

If you are required to be VAT registered in the UK as well as other European countries where you operate, please remember to enter your VAT numbers in your Seller Profile in your Amazon Seller Account as soon as available.

Get informed about VAT

What is VAT and how does it work? Learn more here.

How do you know if you are required to be VAT registered in the UK? Learn more here.

You are a business outside the EU selling to UK customers and fulfilling orders from inside the UK? Read here the information provided by the HMRC.

Hello World

We’ve been busy putting our website together so haven’t had the time to write any blog posts yet.

We will be using our blog to keep you all up to date with the latest happening with our campaign against VAT Fraud on eBay & Amazon.

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