RAVAS Joins 18 Industry Leaders in Call to Reform Online Marketplace VAT Collection

RAVAS is proud to support a joint letter signed by a diverse coalition of 19 trade associations, professional bodies, and campaign groups—ranging from the British Retail Consortium to Dan Neidle’s Tax Policy Associates.

Written by Andrew Goodacre of the British Independent Retailers Association (BIRA), the letter has been submitted to Exchequer Secretary Dan Tomlinson. It highlights a critical loophole: currently, Online Marketplaces (OMPs) are only required to collect VAT for sellers based outside the UK. This has allowed thousands of overseas businesses—primarily from China—to "game the system" by posing as UK-based entities.

The Scale of the Problem

Despite recent updates to Companies House and HMRC, the current infrastructure remains vulnerable. Fraudsters continue to evolve their tactics, with RAVAS identifying two major trends this week alone:

• Proxy Directors: Chinese traders are now hiring UK residents to act as directors specifically to bypass marketplace screening.

• Artificial Fragmentation: Traders are setting up multiple limited companies to stay under the VAT 90k threshold. This practice is not limited to just overseas sellers. RAVAS has seen one example with 15 limited companies selling the exact same products from the same address.

  
  

The Need for Reform

Because Companies House lacks robust investigative powers and address verification, these "paper entities" have no real substance. When fraud is detected, tax authorities find themselves with no one to pursue. RAVAS and its fellow signatories believe that until OMP VAT collection rules are expanded to all sellers, the UK remains wide open to systemic tax evasion.

For some time members of the House of Lords, and in particular Lord Leigh of Hurley have been calling for rapid reform in this area post Brexit.

Full list of Signatories

• Association of Chartered Certified Accountants

• Association of Cycle Traders

• British American Business

• British Chambers of Commerce

• British Retail Consortium

• Chartered Institute of Taxation

• Dan Neidle, Tax Policy Associates

• Entertainment Retailers Association

• Enterprise Nation

• Entrepreneurs Network

• Institute of Chartered Accountants in England and Wales

• Institute of Directors

• Logistics UK

• National Association of Jewellers

• Radio, Electrical and Television Retail Association

• Retail Sector Council

• Retailers against VAT Abuse Schemes

• UK Warehousing Association

The Letter

Dear Exchequer Secretary

VAT Online Marketplace liability rules

We are writing to urge the Government to bring forward a consultation on extending VAT online marketplace liability rules. Consideration of this reform is increasingly important to address clear unfairness in the current system, which disadvantages honest British businesses and allows fraudulent sellers to compete on an uneven playing field.

Online marketplaces are more important than ever for businesses. They offer an easy and low-risk way particularly for small businesses to participate in online retail, reaching new customers and growth. However, as retail becomes increasingly competitive and omnichannel, even the smallest advantage can determine whether a business survives or fails.

At present, online marketplaces are only required to collect and remit VAT on certain transactions involving non-UK established sellers. Unfortunately, this exception is being exploited by bad actors misrepresenting themselves as UK-established businesses to avoid VAT entirely. While we understand online marketplaces have been constructive partners in tackling this issue, there is only so much that platforms can do to prevent determined fraudsters from exploiting the current system's structural vulnerabilities. This leaves the honest majority who comply with the rules, including very small UK businesses, forced to compete against foreign sellers benefiting from a tax advantage. This is simply not sustainable for UK firms trying to run legitimate businesses while facing a historically high cost of doing business.

As considered by the Government’s informal review last year, extending the VAT online marketplace liability rules is a way of stopping this abuse. This abuse must be stopped to give UK businesses greater confidence that they are competing fairly and help enhance trust in an e-commerce environment that many now depend on for growth. Independent analysis also suggests that extending these rules could raise around £700 million per year, suggesting there is an opportunity for the government to consult on proposals to protect both compliant businesses and the public finances.

We understand that concerns have been raised about potential impacts on the smallest sellers, particularly those below the VAT threshold. As organisations that also represent these businesses, we believe any reform can and should be developed in a way that protects small firms from unintended consequences or additional administrative burdens, for example by excluding unregistered businesses.

The Public Accounts Committee has repeatedly warned that VAT fraud facilitated through online marketplaces is increasing and that the existing regime has failed to keep pace with the evolution of increasingly sophisticated methods used by bad actors to avoid UK VAT collection. Alongside findings from the National Audit Office, Parliament has been clear that stronger measures must be explored to prevent abuse and protect compliant businesses.

We urge the Government to consult on this issue as soon as possible to demonstrate a clear commitment to tackle fraud and level the playing field for UK businesses and increasing tax revenues for the Exchequer from non-compliant businesses.

We stand ready to engage constructively with the Government in this debate.

Yours sincerely,

Andrew Goodacre

CEO

British Independent Retailers Association