Amazon and eBay evict sellers amid VAT crackdown

Thousands of overseas sellers have been evicted from online marketplaces in the UK such as Amazon and eBay owing to a tax crackdown.

Businesses, mostly from China, sold items including British flags, phones and fake eyelashes but evaded VAT.

HM Revenue and Customs (HMRC) sends notices to seven different online sales sites if it discovers businesses failing to pay the correct VAT.

It said that 4,600 sellers have been “red-flagged” in this way.

If the hosting sites, which also include Asos and Etsy, fail to take action they can be pursued by HMRC for any future VAT that is unpaid. These sites have signed up to an agreement with HMRC.

The new rules were introduced in 2016, but the crackdown has been stepped up in the last year.

The tax authority said that it had recouped about £200m in VAT after sellers have registered to pay VAT following an alert, officially called a Joint and Several Liability notice.

Since 2016, the number of applications for VAT registration rose to 58,000 compared with 1,650 applications between 2015 and 2016.

“These figures show that HMRC, working closely with the major online marketplaces, is making real headway tackling this serious and damaging evasion,” said Mel Stride, financial secretary to the Treasury.

Criticism

Last year, a report by the Public Accounts Committee of MPs said that up to £1.5bn has been lost from third-party sellers on online marketplaces not charging the tax on sales they make in the UK.

The committee criticised HMRC for being “too cautious” in pursuing the “fraudsters”.

The fraud has increased because foreign firms selling goods to UK shoppers are keeping some of their stock in UK warehouses to provide next day delivery.

If items are dispatched from UK soil, the sellers have to charge VAT at 20%.