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VAT Avoidance by non-UK based Online Retailers

If you’re a small to medium sized business owner here in the UK with a retail website, chances are that you deal with customers from overseas and you may also deal with suppliers from overseas.  While the internet has provided businesses with a global marketplace, this brings with it issues that need to be considered, especially when it comes to finance and payments.  To begin with, if you’re selling to an overseas market, then your customers may prefer to see prices in their own currency and to pay with their national currency.   As if this weren’t complicated enough already, there’s also the question of Value Added Tax (VAT) to deal with.

It seems that the Public Accounts Committee (PAC) here in the UK has recently complained about the “unfair and illegal” tax practices of overseas competitors who use online trading outlets.  So many sellers outside the European Union do not apply VAT to sales on goods sold through marketplaces such as Amazon and eBay, enabling them to undercut (by as much as 20%) prices charged for similar products by online retailers here in the UK.  Many online shoppers are unaware that this is happening and it harms the UK economy to the tune of more than a billion pounds every year!

This is being treated with increasing urgency by HMRC as Brexit looms ever closer and now a campaign has been launched by a group of UK eBay and Amazon Business sellers who feel they are being pushed out of business by Chinese and other non-EU sellers on both platforms.  Claiming that it’s practically impossible to compete with the thousands of sellers who are able to offer goods at incredibly low prices because they are evading paying VAT, VATfraud.org has compiled a comprehensive report detailing the online VAT fraud and listing hundreds of sellers who don’t pay VAT.  The report was submitted to HMRC but as yet, action on this has not been taken.

The campaign is currently enjoying some media attention and raising awareness of this subject, thanks to a group called RAVAS (Retailers Against VAT Abuse Schemes), an independent pressure group of UK retailers who have already successfully campaigned to end the exploitation of Channel Islands tax loopholes.  RAVAS has also been instrumental in pressuring the UK government to introduce new laws to tackle VAT fraud in the Finance Bill 2016.

If you’re a business owner that sells online via your own website or via trading platforms like eBay and Amazon, then this is an issue that affects you and your business.  Joining together with other business owners to campaign against this type of VAT avoidance is a great way of keeping yourself informed on all the issues involved while striving to increase awareness and address this situation.  Now is a great time to get involved because it’s anticipated that once the UK exits the EU, the situation may become worse.  Prices from non-UK sellers who sell stock located outside the UK on the UK Amazon website will display their products without VAT up to 20% cheaper and goods under the price of £15 from non-UK retailers will be sold VAT free.