With Online Marketplaces now obligated to collect VAT from non-UK sellers it has become much harder to game the system. That hasn't stopped them trying though as RAVAS highlighted in April of 2023 when it came to light that Chinese sellers were setting up bogus UK Limited Companies and UK VAT registrations in order to appear established in the UK to avoid the collection of VAT by Online Marketplaces. After initially denying anything untoward was taking place in early 2024 HMRC finally realised what was going on and wrote to thousands of businesses to check their UK establishment. This in turn triggered robust checks by Amazon (it is not known what action eBay took). The checks that HMRC had carried out when initially issuing UK VAT numbers proved to be entirely inadequate and in order to avoid any liability for VAT under the 2021 Online Market Place rules Amazon had no option but to freeze suspicious accounts and in the process many genuine sellers suffered the temporary freezing of their accounts.
With room to manoeuvre having been reduced significantly by the 2021 legislation non-UK sellers wanting to evade VAT on eBay have yet again found a loophole and exploited it. The latest dodge involves purchasing the eBay account of a private individual seller.
Private individual seller status is not for use by businesses but is intended for private individuals who wish to sell personal belongings and hobby items. Recently private individual seller accounts that have been on eBay for many years have started selling multiples of hundreds of individual product lines. One account RAVAS has seen displays 281 different product lines far beyond what would be regarded as reasonable for a private individual. It appears that a business is using an established private individual seller account to sell goods free of VAT. Because eBay allows private sellers to list up to £15,000 worth of goods rogue sellers can list many different items and post false stock figures. In the previously cited example, the seller shows three of each item in stock and the total stock value of their stock is only £6000. However when an item is purchased the stock level doesn't change. This is probably because the stock levels listed are false and the level of stock available is no doubt far higher.
A search of the internet reveals seller groups where private individual eBay seller accounts are being openly traded with the true owner sometimes being offered a commission for the use of their account. Ironically there is a Chinese Online Marketplace for eBay accounts which boasts "we are a trusted seller for buying eBay accounts. We offer you the best prices for buying US eBay accounts, UK eBay accounts, Australian eBay accounts and mainland (China) eBay accounts. We sell eBay accounts to meet the needs of eBay sellers who buy invisible accounts and introduce them to eBay login and sales".
It is also highly likely that the goods being sold through Trojan Horse Accounts have already evaded import VAT and duty and include items that are unsafe.
This new kind of abuse raises a number of questions. If HMRC pursues the seller but the account holder has sold their account to an overseas entity then who is liable for any unpaid VAT? Is eBay liable for any unpaid VAT as a result of individuals who have sold their eBay accounts? Are those individuals selling their eBay accounts fully aware of the implications for them personally if HMRC come looking for what could potentially be huge sums of unpaid VAT? How many accounts on eBay are Trojan accounts? It is hard to tell but given that the verification process for a private individual account is far less stringent than that for a business account it seems likely that this abuse is growing.
eBay needs to put in place measures to limit the number of items private sellers can list and request more reliable and more regular verification. At present private individuals only need to supply full name, date of birth, nationality, phone number and an address. Business sellers on the other hand need to provide individual identification information for beneficial owners, directors and partners. It would seem that the solution to this problem is obvious. Let's hope that action is taken before it gets out of hand. We all know what happened to Troy …
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