Amazon Calls for Extended VAT Collection Rules to End Abuse

Since 2015 RAVAS has been campaigning for Online Marketplaces to collect VAT. Working with VATfraud.org in 2015 £1 billion a year in lost VAT was identified, a figure that contradicted the £350m per year figure produced by HMRC in 2017. In 2021 legislation was finally introduced that made Online Marketplaces collect VAT and in the first year £1.4 billion in VAT was collected. However, the legislation only extended to businesses located outside of the UK and it was immediately obvious that there was a loophole that would be exploited by overseas businesses mainly from China. Subsequently thousands of bogus companies were set up in the UK by overseas entities enabling them to sidestep the legislation. In 2023 Online Marketplaces tried to crack down on this abuse however genuine UK businesses found themselves caught up in this crackdown because it soon became apparent that it was very difficult to ascertain whether a business was genuinely established in the UK, or not.

Since 2023 there has been a great deal of media attention with regards to flaws in Companies House and HMRC systems that allow overseas traders to game the system. Companies House and HMRC have given a timescale of up to 10 years to correct these flaws. Not only is that far too long it doesn't address the main issue ; that the obligation placed on Online Marketplaces to collect VAT is only partially applied. This has created an opportunity for creative abuse that will always be one step ahead of any enforcement. If the obligation extended to all sellers, no matter what their location, then there would be no opportunity to game the system.

Imagine my surprise when today I came across this public post by Amazon that suggests the collection of VAT should be extended to all sellers not just those located outside of the UK. I can recall sitting in a Public Accounts Committee hearing in 2017 listening to representatives of Amazon explain that VAT wasn't their concern!

In their post Amazon states that "under the current regulations, honest sellers are left confused and unduly burdened by the due diligence checks online marketplaces like Amazon are required to carry out to determine establishment, while bad actors are seeking to exploit gaps in the law by falsely registering their company in the UK" and that "Despite measures by the Government and online marketplaces’ strong controls, these evolving tactics are making it increasingly difficult to detect and prevent fraud" proposing that "extending Deemed Reseller rules to apply to all sellers – whether they are based in the UK or overseas will immediately close this loophole, raise up to £700 million a year for the Exchequer, and create a fairer environment for compliant UK small businesses".

I find myself agreeing with this entirely. The rules as they stand have turned Online Marketplaces into a police force acting on behalf of HMRC, however the way the rules have been implemented means that police force must operate with one arm tied behind it's back. It simply makes no sense to allow this flawed approach to continue. If Amazon alone has collected £6 billion in VAT to date and extending the measures would bring in another £700 million per year (I suspect more) and prevent the ongoing abusive competition why wouldn't you do it ? The UK desperately needs tax revenue and this proposal simply collects what is already due. It also levels competition.

In this instance RAVAS supports Amazon's suggestion and I never thought I find myself saying that in public. When was the last time Amazon offered to collect more tax?