The issue of VAT avoidance on both eBay and Amazon has reached the mainstream media with UK Trading Standards saying that as much as £2bn a year could be going unpaid because sellers from overseas aren’t declaring their sales properly.
This problem, often characterised as one where sellers from China aren’t properly displaying their VAT numbers, won’t be new to to Tamebay readers. We’ve written about it several times before. Of course, it could be related to any overseas sales from non-EU countries.
A piece on the BBC website headlined Amazon and eBay ‘liable’ if they ignore VAT fraud says: “Amazon and eBay could be liable for billions of pounds in unpaid VAT if they fail to properly investigate traders using their sites to escape sales tax, the BBC has learned. The online marketplaces could be legally required to spot the tax evasion committed by many of their overseas sellers. UK firms say they are being put out of business by the unfair competition.”
And in the Guardian a piece titled UK losing millions in VAT from non-EU sellers on Amazon and eBay says: “Both firms say they have no obligation to police VAT compliance by sellers as Brussels warns of huge rise in goods shipped with value under-declared.”
The BBC piece quotes an official from UK Trading Standards: “Paul Miloseski-Reid has been the lead officer on e-commerce for UK Trading Standards for the last nine years. Based on an analysis of thousands of marketplace traders he estimates up to £2bn of VAT is being lost each year. “The legislation provides a safe harbour defence for intermediaries, up until the point they become aware of that illegality,” he said. “To keep that defence they need to demonstrate that they acted quickly to stop that illegality in the future. This could be an automatic solution where the VAT number given by the seller is automatically checked against the European database.”
We asked eBay for a statement and they told us: “eBay reminds all its users of their need to comply with their legal obligations and we also provide helpful guidance on VAT through our Policies and Help pages with the aim of providing a safe and fair marketplace for all our buyers and sellers. If eBay sellers are found to be breaching UK VAT compliance rules, we will cooperate with HMRC in all cases where HMRC provides evidence of underpayment of taxes.”
Amazon is quoted in the BBC piece as saying: “Marketplace sellers are independent businesses responsible for complying with their own VAT obligations. We do offer tools and information to assist sellers with their compliance, but we don’t have the authority to review their tax affairs. Naturally we cooperate with HMRC as we are required to by law.”
We’ll be interested to see how this unfolds. Because as far as we can see the situation is complex. The HMRC rules regarding the display of VAT numbers are not clear when it comes to online marketplaces and it’s worth noting that this situation has been bubbling up for some time. There is a clear need for the rules to be clarified and enforced by HMRC.
eBay and Amazon have been clear that they believe that they are fulfilling their obligations under the current rules. Neither seems keen to take the matter in hand and be a strict enforcer above their minimum legal requirements. It seems to us that they are operating to the word of the law and take very few steps to verify or confirm VAT numbers or details that sellers do display.
And that is very frustrating for compliant UK and EU sellers who quite rightly consider the situation intolerable. It’s tough to look out and see non-complaint sellers from places like China clearly selling at lower prices than compliant sellers and also see the marketplaces doing little or nothing on their behalf in the interests in fairness.
This media spotlight is long overdue.
68 Responses
Firstly in my last 10 orders, 6 arrived from outside the EU. Even my mum laughed that people are now shipping nail cutters 1 by 1 from China. However I did not know where these goods were coming from before ordering.
Secondly, id encourage everyone to only order goods from chinese sellers, why pay for royal mail delivery when you can it for free, why pat 20 per cent tax, when you van get it for free.
This saving potentially is £4.40 out of £10.
Hopefully we can get the whole country on it by christmas.
When every vat register seller pays nothing in their VAT return, then finally the government will get their finger out of their backsides. Because they clearly are not bothered right now. Because they have been told about this for many years, even now the bbc article mentions ‘brussels’.
HMRC have great difficulty in collecting the correct VAT from domestic traders whom they have full and complte jurisdiction over ,so its fantasy thinking they may make chinese traders cough up
And if they try and pass the buck to ebay and amazon the corporate litigation machine will run them round in circles for decades
I think the point is completely lost here on those who do not understand VAT law or what is going on . Chinese Traders (and others) who have stock in the UK are selling it and are not registered for VAT. Amazon and Ebay should know the stock is in the UK and they should know the traders are not registered for VAT. On that basis they are involved and should be made liable. If they are not made liable they have no incentive to block these traders from operating on their platform. Making Amazon and Ebay liable would not mean they pay the VAT unless they allow traders to sell stock from a UK location with no VAT. That is the issue. At present they have no incentive to stop this. See here https://www.hmrc.gov.uk/manuals/vatfmanual/vatf53405.htm
This is a well established principle. HMRC are supposed to protect us. They should do it. NOW
Today I have started to directly report to Amazon sellers I see whose business information states they are from outside the EU, who are using FBA but are not showing a valid EU Vat number. If Amazon fail to act then they are derelict of their duties to police their site from VAT evading companies.
If anyone else wants to follow suit here is my template I am sending to seller performance:
ASIN: [enter ASIN]
This seller is using FBA to sell from business to consumer within the UK. Their goods are sent from a UK Amazon warehouse to UK non-business buyers. As thus under UK VAT laws they should be VAT registered. On their business information page they show no VAT numbers:
[Enter Business information page from Amazon]
Here is the UK Government website stating their legal obligations:
https://www.gov.uk/guidance/vat-how-to-work-out-your-place-of-supply-of-services
I believe this seller maybe not declaring UK VAT and is thus breaking UK tax laws. I am asking Amazon to investigate this matter urgently.
By the way I forgot to mention I have spoken to eBay top customer care this morning and eBay have already had a meeting about this matter today so I expect some movement soon.
Things cant go on this way.
Remember to turn in to Radio 4 PM program today – starts a 5pm
Good about time
I’ve mentioned this before and will mention it again.
Amazon and eBay actively turn a willing blind eye to this fraud because it is beneficial for them.
Both companies failed spectacularly in China for various reasons – home-grown companies rule the roost there – Taobao, Tmall etc make up the domestic market.
The only way Amazon and eBay could actively carve out a chunk of the market was to encourage cross border selling. The VAT fraud issue is convenient because it gives Chinese sellers an even greater advantage. Amazon and eBay get commission, customers are happy because prices are cheaper and both platforms establish themselves as a go to place for cross border retail sales for Chinese sellers.
There was a response by an eBay representative here a while back – with a cynical, corporate (laughable) speak about eBay taking an active interest in the problem. We all know its not true – we’ve seen no evidence to date.
It’s not just in the UK this is an EU issue. I did a test purchase with a chinese competitor to find it came from Belgium.
I believe it should be down to Amazon/Ebay to check VAT numbers when sellers register this. I also believe if these seller say the goods are in the UK then this should also be checked and verified with HMRC.
I would also like Trading Standards to investigate the items these sellers sell and huge markdowns, these are not being run within the guidlines set out, another major issue.
All this combined with goods being sent in to the UK with ‘gift’ and a fake value are costing us a lot of money.
Countries are moving to stop the above issues, but way to slowly, I was told France are lowering their VAT threshold next year to 35k euro for EU sellers to have to register for their own VAT, this will catch a lot of sellers out.
Richard Murphy economic advisor to Jeremy Corbyn has posted an article:
https://www.taxresearch.org.uk/Blog/2015/11/02/amazon-and-ebay-who-is-liable-for-the-vat-evasion/
Also another article on The Register
https://www.theregister.co.uk/2015/11/02/hmrc_tax_vat_amazon/
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Re: ” as much as £2bn a year could be going unpaid because sellers from overseas aren’t declaring their sales properly. ”
Should this read ‘as much as £2bn a year could be going unpaid because sellers from overseas that are using UK/EU based agents/importers, but use Chinese address & ID accounts aren’t declaring their sales properly. ‘
so how do the USA deal with this ?
Good to have Lord Lucas backing from House of Lords.
Classic quote from Lord Lucas twitter account:
https://twitter.com/LordLucasCD
“The truth of this is that HMRC is allowing UK businesses to be destroyed, and Amazon+EBay are, as ever, shitpuffins”
I don’t really expect ebay to do anything at all until it hits their pockets by way of fines and legal action….
I have for months been clicking the ‘report this item’ button when one particular seller has a rival auction site’s name plastered at the bottom of almost every listing picture – several months on, the seller is still active and still has the rival site’s name clearly visible, so if ebay will not enforce their own rules why should they bother worrying about this matter either ?
This video explains it. If I was Amazon and ebay I’d be kacking myself
https://www.youtube.com/watch?v=W8hPnV1L3zI&feature=em-upload_owner
And this Radio 4 broadcast…
https://www.youtube.com/watch?v=RPKKX8P7RA8
While I actually welcome Chinese sellers for some spare parts that I need (£5 for 20 items from China, that would cost £8 per single item if I bought it on a UK High St), the problem with some Chinese goods runs much deeper, and Trading Standards should take a tougher line.
There is a furniture seller in my town that imports two containers of furniture a week, from China. I’m not in the furniture trade, so have no bone to pick with them.
However, I was made aware that the importers of this Chinese furniture are also supplied with Fire Safety Labels that they physically attach themselves before sale. Although the furniture may be perfectly safe and adhere to fire safety rules, EU legislation requires that such labels should be physically stitched into the furniture’s seams, and not just attached with a nylon tie.
Trading Standards probably don’t have the resources to keep up with these people, so perhaps fines/sentences should be increased to encourage others to toe the line.
However, I am still a bit confused as to why a tax issue is being addressed by Trading Standards…..
A simple fix would be for eBay and Amazon limit a sellers account to £82k turnover as soon as this limit is reached the account is locked until a valid VAT number is added that matches the registered account details no Vat number no more sales.
They need to link accounts so sellers cant use multiple account to bypass the limit
Here is the EU Judgment that makes Amazon and Ebay potentially liable for VAT fraud
Intalmoda Judgment (click on ‘english’ version)
https://curia.europa.eu/juris/liste.jsf?num=C-131/13
This case was about a right to deduct VAT that was denied by the Dutch Authorities due to the fact it was reliant on fraud elsewhere in the supply chain but it is a general principle that applies to all VAT situations involving fraud irrespective of the VAT right affected by the fraud …
It is a surprisingly low threshold… You only have to show that the party to the abuse knew or should have known about it…
How difficult would it be for HMRC to show in court that Amazon or Ebay should have known that a trader should be VAT registered if they are selling a million quids worth of stuff from a UK warehouse ? I think it wouldn’t even be difficult to show they knew!
Looks very clear to me…
Things are going to get very interesting. I suggest everyone starts logging complaints against Amazon and Ebay for traders involved in VAT fraud and post the replies on this website… That way you can then show they knew (even if the ‘should have known’ test fails…which in my view is unlikely…)
Truth
46 Thirdly, as the Advocate General stated in points 50 to 52 of his Opinion, in so far as any refusal of a right under the Sixth Directive reflects the general principle, mentioned in paragraph 43 of the present judgment, that no one may benefit from the rights stemming from the Union’s legal system for abusive or fraudulent ends, such a refusal is the responsibility, in general, of the national authorities and courts, irrespective of the VAT right affected by the fraud, including therefore the right to a VAT refund.
47 Contrary to what the Commission maintains, that conclusion cannot be called into question by the fact that the latter right is of a special nature in that it constitutes a corrective mechanism designed to ensure the neutrality of VAT in certain cases of intra-Community supplies.
48 In this regard, it is appropriate to note that it follows from the case-law cited in paragraph 44 of the present judgment that the central function of the right of deduction provided for in Article 17(3) of the Sixth Directive, in the VAT mechanism designed to ensure complete neutrality of the tax, does not preclude that right from being refused to a taxable person in the event of participation in fraud (see to that effect, inter alia, judgments in Bonik, EU:C:2012:774, paragraphs 25 to 27 and 37, and Maks Pen, EU:C:2014:69, paragraphs 24 to 26). Similarly, the specific function of the right to a VAT refund, intended to ensure the neutrality of VAT, cannot preclude that right from being refused to a taxable person in such a situation.
49 In the light of the foregoing considerations, it is, in principle, the responsibility of the national authorities and courts to refuse the benefit of the rights laid down by the Sixth Directive when they are claimed fraudulently or abusively, irrespective of whether those rights are rights to a deduction, to an exemption or to a VAT refund in respect of intra-Community supplies, as at issue in the case in the main proceedings.
50 It must further be noted that, according to settled case-law, that is the position not only where tax evasion has been carried out by the taxable person itself but also where a taxable person knew, or should have known, that, by the transaction concerned, it was participating in a transaction involving evasion of VAT carried out by the supplier or by another trader acting upstream or downstream in the supply chain (see to that effect, inter alia, judgments in Kittel and Recolta Recycling, EU:C:2006:446, paragraphs 45, 46, 56 and 60, and Bonik, EU:C:2012:774, paragraphs 38 to 40).
the Chinese will laugh their nads off and sell even more.while your chasing your arse reporting all these vat frauds,
.
My concern is that with Amazon’s recent grab of information via their verifcation requirements will be used to buy off HMRC noseiness into their afairs.
I wish i was chinese.
I could David Beckham to endorse my listings for free
https://i.ebayimg.com/00/s/ODAwWDgwMA==/z/vZUAAOSwAL9UixaZ/$_57.JPG
I could also take part in trademark infringements wihtout any punishment, not to mention the bonus of copyright
https://i.ebayimg.com/00/s/NjAwWDYwMA==/z/x1sAAOSwqu9U~nW5/$_12.JPG
The Chinese just don’t seem to understand the notion of copyright or trademarks. It’s like such laws don’t exist in their culture? Trying to explain to my supplier why I can’t buy and sell fashion watch boxes with a copied Daniel Wellington logo on them.
Another advert popped up on Facebook for a Swiss watch shop, all fakes Breitling rolex omega £90 each using official stock photos from all the Swiss brands, its unbelievable. .con. Hosted in China
As a small business who is under the VAT threshold, but voluntarily VAT registered I always make sure I try my best to buy from UK sellers who are VAT registered.
A long time back I stopped buying from any Amazon Marketplace sellers, as it was sometimes not possible to get VAT invoices especially from sellers who are “Fulfilled by Amazon” where they would also provide the customer support and there would not be any way of contacting the seller directly, and Amazon Policy being they will contact the seller twice to ask for a VAT invoice and if they did not provide one then that would be it – case closed, and no VAT invoice.
I have had several instances on EBay where the seller has not provided a VAT Invoice on request. It would seem if this happens there is nothing anyone can do to help. I have even contacted HMRC who cannot help or offer advice. It would seem if you are VAT registered and do not provide an VAT invoice this is OK and there will be no comeback. The sellers phone numbers constantly went to a voicemail service where calls are not returned and EBay messages are not replied to. In the end you spend so much time trying to get a VAT Invoice for a small amount you start to realise it is not worth perusing any further as time is money, and end up having to make a loss. You have done everything right, but there is no support or help for situations like this.
The most recent shocker was buying two items from a EBay seller who was UK company registered, with a UK VAT number and UK address. The two items came to £24 with Free Delivery. Both items were shipped together from Switzerland with a non-VAT invoice showing £15 for the items and £9 for shipping. Anyone who has common sense can clearly see what they have done here. The VAT threshold for sending items without duty from Switzerland is £15. There was two issues here, first being they advertised as a UK Vat Registered business with no clear indication the items would be shipped from Switzerland and no VAT would be charged, and second being the items which had a value of £12 each and free delivery then had a combined value of £15 and £9 delivery. Because they would not provide a VAT invoice it would have been cheaper to buy the items elsewhere, slightly more expensive from a real VAT registered supplier. I contacted HMRC and they offered no help whatsoever and were not interested at all in helping or in what had happened, infact they ended up arguing with me about this, making it seem as if I had done something wrong and makes you realise trying to do the right thing is just not worthwhile.
HMRC really need to get their act together, take notice and support and help with issues like these. It seems to be increasing, with people knowing they can easily get away with it and can really affect small businesses badly.
Theres an account on ebay using a vat id of
[VAT ID removed by admin]
There isnt a company with this ID on ec.europa.eu, it cant be a new company it has around 400,000 feedbacks. The account also shows an address in Manchester but no name, there is no domain and the email account is hotmail.
Images are hosted on auctiva, which could possibly lead to the account owner should someone wish to find the fraudster.
Clear VAT fraud, which has been going on for a very very long time.
There is a seller on ebay, that uses this image on 1800 listings.
[link removed by admin]
The domain is hosted at 1and1 in Slough and the domain is not private.
The seller has 300, 000 feedback, the domain is registered in the UK. The eBay account is registered in Hong Kong. The email used is Hotmail.
This is clear tax evasion, with no VAT, Corporation tax or income tax declared in the UK.
Lack of action against accounts like this are simply very lazy from HMRC.
Quite Shoddy.
Please keep reporting these sellers as much as you can to ebay and amazon every way you can help a uk business if you report them by law they will need to investigate them cause its seriously hurting all uk business with all these Chinese sellers the don’t pay a penny tax or vat so please report them this is the only way even if you report one seller a day it will help some uk business.
FIRST BIG SCALP:
Last week a Chinese VAT evading seller was reported to eBay I heard and today their listings have all been removed. This seller was selling £38k per month.
It would appear that eBay have listened this time, however, there should be checked in place to not allow them to list in the first place without a VAT number if they are stating stock in UK and they are a non-uk business with no VAT number showing.
eBay should remove EVERY listing which matches the above criteria.
I did post a reply but as I suspected it was removed. I can verify what was said on the comment before. Tamebay are aware of the user id as they have been forwarded proof.
Unfortunately the comment policy will not allow me to leave such information