Online VAT fraud: Calls for government crackdown grow louder

Calls to crack down on companies selling goods online in the UK without declaring VAT have gathered pace, with a peer and another high profile individual now voicing their concerns that the practice is damaging UK business.

The Register has previously reported on the seemingly growing number of sellers based outside Europe who hold stock in the UK, but sell goods online without having a registered VAT number.

One small business owner, who asked not to be named, said the practice had undercut his business for consecutive years, to the point where he no longer employs staff.

An online petition was recently launched to fight alleged VAT fraud on eBay & Amazon in the UK – which small traders say is undercutting them and threatening their businesses.

In response to the petition, eBay said it reminds all its users of their need to comply with their legal obligations and if eBay sellers are found to be breaching UK VAT compliance rules, it will cooperate with HMRC in all cases where HMRC provides evidence of underpayment of taxes. Amazon has not yet responded to our request for comment.

The Register now understands a high-profile individual has agreed to hand George Osborne an independent report detailing the widespread practice of companies selling goods online in the UK without declaring VAT.

Lord Lucas is also thought to have backed the calls to address the growing problem of sellers.

According to the report seen by El Reg, over the past decade foreign sellers have come to dominate UK online marketplaces, particularly in the consumer electrical goods market. For example, on one site in a particular sector, the biggest UK businesses made up 56 per cent of sales last year. Now they make up less than 18 per cent of sales.

Under UK tax law, sellers have to declare 20 per cent VAT. But a number of sellers without listed VAT numbers, appear to be selling iPads at a rate that would amount to a loss-leader if they were declaring VAT.

Earlier this year Blighty’s Trading Standards reported more than 200 non-EU sellers to eBay for failing to display VAT numbers – a figure the body thought “barely scratched the surface” of traders breaching the rules.