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. These are the only assets in reach of HMRC.
VAT Evading Overseas Retailers are simply shutting up shop and start trading under a new (VAT compliant) company the next day with the same stock, on the same highly ranked product listings without paying a penny of their evaded VAT. If a UK based seller did this they would end up in prison. This is not a level playing field or a fair legal system.
Seizing Stock – A Method of Debt Recovery
Quote from Jim Harra HMRC’s Second Permanent Secretary and Deputy Chief Executive:
“We looked at was whether we can take property towards debts from, for example, Amazon’s fulfilment houses. There we would be reliant on what is called taking control of goods orders, which are a debt collection process administered by the Ministry of Justice. So far we have not used that and we don’t consider that it would be a useful use of our resources to use it, but we are liaising with the Ministry of Justice to see whether there is a better process that would help us more.”
(Reference: Oral Evidence PAC Hearing – 5 September 2018 – Q129 & Q130)
Quote from Ruth Stanier Director of Customs and Indirect Tax:
“It is important that seizure action is effective and efficient, for example seizing goods where there is sufficient stock to cover the tax debt, or where seizure would have a significant impact on the owner of the goods”.
(Reference: Response to Chris Heaton-Harris MP.)
It is very clear that HMRC view seizing stock purely as providing a fiscal return in the debt recovery process.
Seizing Stock – A Method of Deterrent
Seizing stock should be used as a deterrent and should not be dictated by purely a fiscal return. In Germany the tax authorities seized stock from Amazon warehouses and as a result it sent shock waves through the VAT abusing Chinese community.
In the UK there have been no seizures of stock from Amazon. This has resulted in the UK being regarded a soft touch in terms of risk as perceived by those avoiding or evading VAT. The costs of this are far greater than the ones that Jim Harra & Ruth Stanier attributes to the debt of one trader.
Inequality in Enforcement & Justice
It is extremely clear to VAT Compliant UK Online retailers that HMRC enforcement approach has to led to huge inequality in the Enforcement & Justice system. There is absolute no justice in the current system. There is a 2-tier justice system; one rule for them, one rule for us:
- Overseas Online Retailer:
Can avoid millions in unpaid VAT, they get their stock back, allowed to withdraw all funds, can setup a new company and start trading without any prospect of prosecution by HMRC.
- UK Online Retailer:
Unable to pay their VAT bills on time are threatened with bailiffs and closure of their business.
UK Online Retailers have completely lost all faith in HMRC and the fairness of the justice system. In their view, HMRC continues to displayed complete incompetence, a lack of understanding and comprehension in tackling Online VAT Fraud.
HMRC must be seized, funds frozen and listings blocked. This would send a very clear message to VAT evaders and act as a much needed deterrent.
Seized stock doesn’t not need to be sold as part of the debt recovery process. It can simply be destroyed. Amazon already offer this service to sellers.
How Phoenix Accounts Work on Amazon
Non-EU Overseas Online Retailers can setup a new Amazon account under a completely separate company name. Once a new account has been setup, the seller can attach the new account to all their old products listed on Amazon.
Please read our Complete Guide on How Amazon Phoenix Accounts Work for further information.