HMRC told AGAIN to toughen up on VAT-dodging online traders

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Nearly 5 hrs and no replies, not needing to get the :popcorn: out...................... just yet ;)

It’s not surprising they are looking at a way via payments, it’s obvious customs haven’t been able to stop the incoming tide.
 
Collecting VAT (and import duty) directly from the selling platforms is the obvious way of doing it - HMRC doesn't have anywhere near enough in the way of resources to deal effectively with the myriad of foreign-based sellers who either depatch from overseas or who feed into fulfilment houses based in the UK, often understating both value and giving a false description of the goods in the process.
In relative terms, it's easy to force ebay and amazon to simply pay 20% of the sale plus P&P cost direct to HMRC, and simple for legitimate (tax paying) traders to account for this in their VAT returns.

I'm surprised though at the estimated loss of revenue of £1bn - I'm pretty sure that £4bn would be much nearer the mark. Enforcing the law would bring in money to the government, even more importantly though it would place legitimate sellers on a level playing field.
 
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to me its a pretty foregone conclusion that hmrc are working to a worked out agenda .i.e most small stuff coming via china is allowed through ,(perhaps they cant read the writing) or is there some agreement because of Hong Kong ,but most other places are pulled ,and god forbid at this moment in time you buy anything from the good old u.s.a then the full weight of vat and import duties prevail ,I do wonder if this will change if we have a trade agreement after Brexit though ,that could be interesting , I dont think imports through Canada are subject to controls though (certainly never used to be) .

but coming back to this game I have no problem with companies that let you know there grey importers and lay out correct prices and delivery times etc as its then your choice to buy or not .... but what really does irk me is the (often) Chinese firms that sell stuff on e.bay pretending that a item is u.k based and then you have to wait weeks for it to get here . I have a item for my dog on order that has turned out that way and they will definetly be getting negative feedback when/if it arrives .I,m not the most patient of chaps
 
to me its a pretty foregone conclusion that hmrc are working to a worked out agenda .i.e most small stuff coming via china is allowed through ,(perhaps they cant read the writing) or is there some agreement because of Hong Kong ,but most other places are pulled ,and god forbid at this moment in time you buy anything from the good old u.s.a then the full weight of vat and import duties prevail ,I do wonder if this will change if we have a trade agreement after Brexit though ,that could be interesting , I dont think imports through Canada are subject to controls though (certainly never used to be) .

but coming back to this game I have no problem with companies that let you know there grey importers and lay out correct prices and delivery times etc as its then your choice to buy or not .... but what really does irk me is the (often) Chinese firms that sell stuff on e.bay pretending that a item is u.k based and then you have to wait weeks for it to get here . I have a item for my dog on order that has turned out that way and they will definetly be getting negative feedback when/if it arrives .I,m not the most patient of chaps

I quite like some of the Chinese sellers in eBay. Their titles and descriptions are atrocious and misleading most of the time so you can get your money back.

I ordered some 12cm spikes for my tripod from ebay. The listings title was 12cm spike (set of three) but in their description they stated (in small print and hidden unless you click view description on ebay) that this was only one spike but included a spike, little spanner and a washer. This was their set of three. The cost was £8 each, so £24 in total.

Guessing they were pulling a fast one, I ordered three (sets of three) and as expected I received three spikes, three spanners and three washers.
I then contacted the seller to tell them that I had only received a set of three spikes and asked where the other two were. No reply after 7 days.
Opened a Paypal dispute and after a short period got a £16 refund. :D

So I got a set of three very nice spikes for £8. They are still advertising them as a set of three though so they obviously make money from it.

In fact, anybody looking for some cheap spikes, here go (and they've dropped the price!)
https://www.ebay.co.uk/itm/Replacem...614864?hash=item4d6f967bd0:g:sQMAAOSwdGJavhlg
 
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In relative terms, it's easy to force ebay and amazon to simply pay 20% of the sale plus P&P cost direct to HMRC, and simple for legitimate (tax paying) traders to account for this in their VAT returns.

The issue with this approach is that they'd have to make allowances for legitimate UK businesses below the VAT registration threshold to sell without being penalised with a tax burden they're not liable for - otherwise they end up pricing small, growing businesses out of the market. The minute you provide a channel for bypassing the VAT, it'll get exploited. Chinese sellers will just set up dozens of accounts and keep their sales volume below the VAT threshold within each one.
 
to me its a pretty foregone conclusion that hmrc are working to a worked out agenda .i.e most small stuff coming via china is allowed through ,(perhaps they cant read the writing) or is there some agreement because of Hong Kong ,but most other places are pulled ,and god forbid at this moment in time you buy anything from the good old u.s.a then the full weight of vat and import duties prevail ,I do wonder if this will change if we have a trade agreement after Brexit though ,that could be interesting , I dont think imports through Canada are subject to controls though (certainly never used to be) .

but coming back to this game I have no problem with companies that let you know there grey importers and lay out correct prices and delivery times etc as its then your choice to buy or not .... but what really does irk me is the (often) Chinese firms that sell stuff on e.bay pretending that a item is u.k based and then you have to wait weeks for it to get here . I have a item for my dog on order that has turned out that way and they will definetly be getting negative feedback when/if it arrives .I,m not the most patient of chaps
Nearly all of the electronic and other hi-tech stuff is made in Schenzen, which is right next to Hong Hong, and even products made on the other side of China are often 'exported' to Hong Kong, where controls seem to be even more relaxed than in mainland China. I can't see why leaving the EU should change this evasion culture, and I can't see why a trade agreement with the USA would stop the correct amount of duty and VAT being charged.

There are a lot of different ways of evading import duties and VAT, many items are despatched via Chinapost with totally false content descriptions (e.g. described as VAT-free childrens clothing) or as a free sample, or the value is dramatically understated, all to evade taxes.
Another popular method is for the goods to be delivered to a warehousing facility located in the UK, they simply stick the item in a Jiffy bag or similar and post it to the customer, they aren't breaking the law because they are simply acting as agent for the seller, who is in China and beyond the reach of HMRC. The goods can be seized, but that's about it.

Obviously HMRC know all about all of these methods but without the political will do actually stop it, which would involve giving HMRC the resources they need, there's little that they can do.
The issue with this approach is that they'd have to make allowances for legitimate UK businesses below the VAT registration threshold to sell without being penalised with a tax burden they're not liable for - otherwise they end up pricing small, growing businesses out of the market. The minute you provide a channel for bypassing the VAT, it'll get exploited. Chinese sellers will just set up dozens of accounts and keep their sales volume below the VAT threshold within each one.
Yes, it might get complicated, but that should not be a reason for doing nothing. As things stand, legitimate British businesses, both small and large, are being discriminated against, simply because they don't break the law.
 
Yes, it might get complicated, but that should not be a reason for doing nothing. As things stand, legitimate British businesses, both small and large, are being discriminated against, simply because they don't break the law.

I work in ecommerce - until a couple of years ago, in a company which traded on ebay, often in competition with chinese sellers evading tax. I was made redundant after 22 years with the same company, when it finally succumbed to commercial pressure and went into administration. Thankfully, I got a big redundancy payment underwritten by the redundancy payment service and found a new role pretty quickly in a much less pressurised market sector. Believe me, I know exactly what an issue this is. I agree entirely with your sentiment, just not the method, which I think would backfire and stop innovation from small, UK startups. Unfortunately, I think the only solution will be better customs controls at the point of entry. It won't be popular though, as Brits are far too keen on cut price tat from the Far East and bargain grey imports.
 
I think the only solution will be better customs controls at the point of entry. It won't be popular though, as Brits are far too keen on cut price tat from the Far East and bargain grey imports.
I think you're right.

It would be interesting to see whether anyone has done a cost-benefit analysis of this. It's estimated that annual losses to online VAT fraud are probably around £1 billion to £1.5 billion [1], but the UK's total budget for border security (which includes, and is probably dominated by, immigration in addition to customs) is around £0.6 billion [2]. A customs clampdown might pay for itself.

[1] https://www.nao.org.uk/report/investigation-into-overseas-sellers-failing-to-charge-vat-on-online-sales/
[2] https://www.nao.org.uk/wp-content/uploads/2017/02/Departmental-Overview-2015-16-Home-Office.pdf
 
I think you're right.

It would be interesting to see whether anyone has done a cost-benefit analysis of this. It's estimated that annual losses to online VAT fraud are probably around £1 billion to £1.5 billion [1], but the UK's total budget for border security (which includes, and is probably dominated by, immigration in addition to customs) is around £0.6 billion [2]. A customs clampdown might pay for itself.

[1] https://www.nao.org.uk/report/investigation-into-overseas-sellers-failing-to-charge-vat-on-online-sales/
[2] https://www.nao.org.uk/wp-content/uploads/2017/02/Departmental-Overview-2015-16-Home-Office.pdf
That figure is just a guess, and could be much higher (or lower) but my own guess is that it is much higher.
Selective quote from the investigation report: HMRC estimates that online VAT fraud and error cost between £1 billion and £1.5 billion in lost tax revenue in 2015-16 but this estimate is subject to a high level of uncertainty.
They specifically mention mobile phone accessories as an area of VAT and duty evasion, but my guess is that just about everyone who reads this will also be aware of at least some of the much bigger ticket items sold online without VAT and duty being paid, such as cameras, lenses, Godox lighting and so on.
 
That figure is just a guess, and could be much higher (or lower) but my own guess is that it is much higher.
That's my feeling too, but I'm aware of my potential bias.

I'd like to believe that there is some proper analysis behind these figures, and that HMRC have actually looked at a reasonable cross-section of the import market. It's very easy for you and I to focus on photographic equipment because it's a market which we know about, and where we're seeing daily reminders about VAT fraud. But there are probably all sorts of other markets where VAT fraud isn't so rampant, which we're not so aware of, but HMRC have included in their analysis. That would pull the overall percentage lost to fraud down.

On the other hand, you're absolutely right that the report does highlight a high level of uncertainty, so i guess the bottom line is that nobody really knows.
 
That's my feeling too, but I'm aware of my potential bias.

I'd like to believe that there is some proper analysis behind these figures, and that HMRC have actually looked at a reasonable cross-section of the import market. It's very easy for you and I to focus on photographic equipment because it's a market which we know about, and where we're seeing daily reminders about VAT fraud. But there are probably all sorts of other markets where VAT fraud isn't so rampant, which we're not so aware of, but HMRC have included in their analysis. That would pull the overall percentage lost to fraud down.

On the other hand, you're absolutely right that the report does highlight a high level of uncertainty, so i guess the bottom line is that nobody really knows.
Yes, there is potential bias but my feeling (supported by some experience) is that this type of fraud is rampant on all kinds of B2C products, and certainly in consumer electronics, car accessories, clothing and footwear, sporting goods.
There's very limited opportunity for this type of fraud with B2B sales, simply because business customers want to reclaim their VAT. However, there is still some, I've often bought things where the listing states that a VAT invoice will be supplied but isn't, and the seller goes quiet when asked for it.
 
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