The Register probes VAT affairs of Chinese iPad sellers

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Online tech news outlet The Register has been probing the VAT affairs of Chinese iPad sellers on eBay UK and specifically examines how they can’t be profitable unless they don’t pay VAT.

You can read the whole article on The Register here but this gives a flavour.

“A number of iPad sellers based outside the UK are selling cut-price fondleslabs in Blighty after seemingly bypassing UK VAT payments, a Register analysis can reveal.

Under UK tax law, sellers have to declare 20 per cent VAT. But El Reg has discovered a number of sellers do not have listed VAT numbers and are selling iPads at a rate which would amount to a loss-leader if they were declaring VAT.*

Those sellers who do not pay the tax could force their smaller British rivals out of business, say the latter.”

This is a useful contribution to the debate because 1) it’s rather more measured than the Mirror pieces that have been seen and b) it’s good to explore higher priced items such as the iPads themselves rather than the covers. And the fact remains that there are questions to answer about how so many Chinese sellers do seem to be getting away with it.

12 Responses

  1. There’s nothing to be probed. Its a VAT loophole that many overseas sellers make use of (including Amazon). As long as payment is made to a company outside the EU then they can warehouse and ship the goods from within the UK without charging VAT. HMRC told me that they are looking at closing the loophole. Note the language “looking at” rather than “we are closing.” In other words any business suffering from this tax free competition shouldn’t expect help any time soon.

  2. A relatively simple way around this is for HMRC to require a “withholding tax” equivalent to VAT to be deducted by Ebay for those that sell over say 5 items per month. Legitimate traders can offset this when they submit VAT returns.
    Sounds harsh but its would work and level the playing field.

  3. They should be paying VAT, its covered by NETPs, goods shipped from a UK location are liable for it, they just don’t pay it.

    Dale is right, withholding vat is the only way to sort this out, if its withheld in error then they can sort it out when they submit their vat return.

  4. No doubt eBay will claim (as they have been doing) that they are ‘proactively’ dealing with this.

    More like actively ignoring this fraud and by their deliberate indifference, poor systems and goals (grab Chinese e commerce share) in many cases facilitating it.

    Amazon as well.

  5. I assume ebay charge fees on the full retail sale price including VAT. Surely it is in ebay’s interest to make sure VAT is applied correctly?

  6. Is ebay working? Search taking ages and results are blank. Ebay must be messing around again. Why can’t they do this at night?

  7. Seems HMRC don’t care about this, because I can’t see a bigger loop hole or case they could have that’s avoiding tax at this scale as this and costing the the country millions. The eBay vat scam is well known now. Yet no comment or action taken.

  8. Costing millions, add some zeros, its costing billions!! I have personal experience of reporting a case to HMRC, this was a 250k vat fraud a year case, handed to HMRC on a plate, Amazon also informed and nothing done by either party. My company pays 200+k a year in VAT/taxes and I expected some help or protection from HMRC, but diddily squat!

  9. eBay have been “actively ignoring” for years. Just look at the amount of fake precious metals which are consistently on their site. Absolutely no interruption or pretence to try and resolve this.

    Any comment eBay?

  10. “A relatively simple way around this is for HMRC to require a “withholding tax””

    That’s not simple for HMRC. It requires work and thought processes, so comes under the category of “completion likely to take more than 5 years.”

  11. “They should be paying VAT, its covered by NETPs, goods shipped from a UK location are liable for it, they just don’t pay it.”

    Not according to the HMRC fraud line. I was reporting someone showing a fake VAT number, and said I think I’ve got another one for you. A Hong Kong company with goods warehoused in the UK. They said as long as payment wasn’t received in the UK it wasn’t fraud, but a known loophole.

  12. It is covered by NETP, VAT is based on the place the supply is made, nothing to do with where the payment is received. Whoever you spoke to on the phone was wrong, it wouldn’t surprise me with HMRC.

    I’ve never heard or read about this loophole anywhere, and if you read the NETP it does not mention anything about payment location. If this was the case then eBay would have responded with this answer. Also, I’m sure every online seller in the UK would just open an overseas bank account and avoid VAT legally if this was the case.

    Anybody else heard about this loophole?


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