Up to 40% of VAT evasion may be from UK sellers not Chinese sellers says HMRC

Marketplaces including Amazon and eBay are about to ink a deal with HMRC to dob in VAT evaders. The surprising news is that HMRC and the government have revised their estimates of how much VAT evasion is down to Chinese and other overseas sellers. Having estimated that between £1 billion and £1.5 billion is lost to overseas sellers, they now reckon that as much as 40% of the total VAT evasion could be due from UK sellers.

“We have updated our estimate of tax lost from VAT fraud and error using a revised methodology that takes into account newly available data. Our last estimate was that the tax loss from VAT fraud and error on online marketplaces was between £1 billion and £1.5 billion in 2016-17. We now estimate that overseas sellers contributed to approximately 60% (or £600 million to £900 million) of the VAT loss, with the rest attributed to UK-based sellers.”
– Jon Thompson, Chief Executive and Permanent Secretary of HM Revenue and Customs

An agreement is being put in place which sets out ways in which HMRC and all online marketplaces will work together. This will include details of co-operation and data sharing, how non-compliance will be dealt with promptly and a requirement for online marketplaces to ensure that non-EU sellers’ VAT numbers are valid and displayed.

Existing measure to tackle overseas VAT evasion appear to be working – 27,550 applications to register for VAT from overseas online sellers have been received since March 2016 up to 31st January 2018. This compares with about 1,650 for the whole of 2015.

Around 2,100 cases, resulting in about 1,300 Joint and Several Liability notices have being issued with £120m in compliance yield being identified and assessed. £45m of this is from businesses who are now engaging with HMRC to comply with their obligations and pay their outstanding VAT debt without the need to issue a Joint and Several Liability notice.

HMRC also not that there will also be additional VAT paid from sale which previously would have been won by non-compliant sellers removed from marketplaces and is now likely to go to VAT compliant sellers.

What there’s not much substance of in the latest news is what steps will be taken concerning the 40% of lost VAT attributed to UK sellers. It is of course perfectly possible that this number will again be revised as many UK online sellers could be trading below the VAT threshold and HMRC acknowledge that there is a level of uncertainty in their estimates. It’s also widely known from previous VAT evasion letters sent to UK online retailers that HMRC aren’t that good in correlating your marketplace displayed business information with the VAT returns that you submit.

What it does mean is that if you are trading and should be registered and paying VAT as a UK seller there’s a high probability that HMRC will ask for your trading history from the marketplaces you operate on and you can expect the same if you’re a non-EU seller trading on UK marketplaces.

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what could be so difficult in ebay or amazon stopping all sales once vat threshold has been reached if no vat number uploaded or displayed... answers please to ihavenobrains@hmrc.co.uk

derek duval • 8th April 2018 •

Snitches get stitches.

Mike • 9th April 2018 •

Oh, your 'ard

Ben • 9th April 2018 •

Say HMRC,HMRC say alot, regretfully they know and have still done nothing. Great avoiders for the win !

ifellow • 9th April 2018 •

I am not sure what HMRC are trying to prove with this? A) Just because 40% are in the UK does not mean HMRC are failing to do their job and collect tax from these people/companies. B) The majority of tax evasion is outside of the UK still.

Tim • 9th April 2018 •

Hi Tim, You sound like you understand the system and have expertise in the field. Say a UK seller / overseas seller profits roughly 10.000 pounds pr year. And never reaches the 70.000 pounds threshold a year. Would these sellers be subject to VAT paying in the UK? Or is it at the point where they go over the threshold? Thanks

Peter • 9th April 2018 •

@Peter It depends - you do not NEED to register for VAT if your if your business’ VAT taxable turnover is less than £85,000 but if you CAN register voluntarily if your turnover is less than £85,000 in which case you would be subject to paying VAT. I am by no means an expert but I do fully understand our tax system in the UK is very very overcomplicated.

Tim • 9th April 2018 •

I'm guessing there are a lot more UK sellers selling in the UK than Non-EU sellers. So the proportion of fraud/error is much higher for non-EU sellers. I thought of great interest from the report was the rush of registrations after the investigation was announced. Of course if tax were simpler there would be fewer errors and if it were cheaper, less fraud.

David Brackin • 9th April 2018 •

Its not about sellers based in UK, EU, NON-EU. UK sellers will end-up paying into TAX system one way or another but here is a Massive loop hole no one is looking at. The gift allowance at £39 and the Low Value Consignment Relief at £15 for the UK in 2018. This law helps overseas sellers because their majority of products have low price value. Whereas, a UK seller importing large consignment from overseas would be required to pay import TAX and when turnover gets to £85,000 then pay VAT also. funny... The United Nations is helping subsidise Chinese shipping. Many Non-EU sellers on ebay have provided VAT number of their Fulfilment service provider in UK which I think is never validated by eBay.

Din • 10th April 2018 •

I've been saying for years the only way to stop this is get Amazon and Ebay to charge VAT at source then it be upto seller to , reclaim the VAT, however HMRC probably don't want the hastle of thousand of online sellers constantly contacting them for refunds. However there must be a way this process can be done electronically. "Din" I could see that Chinesse sellers pay nothing to send there goods here, I just thought they where subsidies by Chinese Postal Service, infact the cost is borne by the Royal Mail!!!! I would have thought that Tamebay would run stories highlighting this massive inequality and competitive advantage that Chinesse online sellers enjoy. This needs looking at immediately. Read this, COME ON TAMEBAY WHY HAVEN'T YOU HIGHLIGHTED THIS!!!! https://www.vatfraud.org/blog/stop-subsidising-chinese-post-via-united-nations-universal-postal-union-upu-terminal-dues/

Thomas Shearing • 11th April 2018 •

has anyone noticed the vat number section you can edit in your account preferences section,where you show what to display has just suddenly disappeared?lol.they already have ours but the box isnt even there anymore just the company number section,wierd

julie • 12th April 2018 •

So youre saying that overseas sellers account for 60% of vat losses. And thats supposed to be a good thing is it?

tony • 18th April 2018 •