back to article Brit iPad sellers feel the pain of VAT-free imports

A number of iPad sellers based outside the UK are selling cut-price fondleslabs in Blighty after seemingly bypassing UK VAT payments, a Register analysis can reveal. Under UK tax law, sellers have to declare 20 per cent VAT. But El Reg has discovered a number of sellers do not have listed VAT numbers and are selling iPads at a …

"It should also be noted that tax avoidance (perfectly legal, as it uses the existing tax system to reduce payments), and tax evasion (escaping payment by illegal means) are quite distinct. We have no way of knowing into which category the sellers fall."

We could use some fairly simple maths.

"thousands of iPad minis" at "£170 each" equals "quite a lot more than the VAT registration threshold"

One also presumes that the traders are reclaiming the purchase tax on the devices - but where are they buying them from?

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The products may be in bond, there may be no sales tax, or they may be operating illegally

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Anonymous Coward

Tax eBay

It's happening on their site, and lets be honest they don't give a flying f*** what it is being sold on their site.

You see tons of piracy sites being blocked/shuttered/raided for providing access to dodgy goods, but for some reason eBay facilitating tax evasion and making untold millions in the process is totally fine???

Until the onus is placed on eBay (and Amazon, Facebook etc) to get their house in order or face financial penalty, nothing will change.

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What about duty?

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Anonymous Coward

Import duty and VAT are charged based on the declared value of the package. Typically they will just look at what the declared value or insurance value on the parcel is and charge duty and VAT based on that amount. If the seller is prepared to take the risk of the parcel being lost in transit, there is a reasonably high chance that the buyer won't end up with an import tax bill. It is not that common that the package is opened and inspected, unless there is evidence of other foul play (e.g. sniffer dogs take interest).

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Silver badge

or start a UK company, sell less than 81k threshold, fold company start new ebay one. Then you pay no VAT. They could also declare as almost new so second hand. Sell out of Luxembourg etc etc Obviously that only works for stock you already have acquired (somehow).

As for Chinese imports they simply lie on the import form so it becomes an import duty dodge.

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As far as I am aware, if the seller does not charge VAT, it should be charged on import with any appropriate duty.

I have been stung by this. I was unaware, and bought 2 CPUs from a US seller. I had to pay import duty, VAT, and an admin fee to the courier (which outstripped the taxes). All in, I ended up paying more than just buying from a UK retailer.

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Trollface

Thats the peril of living on an island.

In the rest of europe your stuff can take mysterius ways and you can avoid import taxes and duty.

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Puzzled too

I've re-read the article a couple of times and I'm struggling to understand it. As Dr Mouse writes - if they're coming from outside the EU then they would be subject to duty and VAT once they hit the UK and the buyer has to cough up before getting mitts on. A quick look on eBay has a number of new iPads from the USA at $250 +$60 prepaid duty charges (which include VAT in my experience). $310 is about £200 on xe.com- so the article doesn't seem to stack up.

The only ones I found from HK were at £190 and the seller does state in the small print that tax and duty are the responsibility of the buyer.

It's possible that the miffed UK sellers are talking about the eBay sales which don't have the duty pre-paid - and those buyers will get stung for Duty, VAT (including VAT on the duty) and £8 Royal Mail handling if it's left on your doorstep by RM. I guess that if the buyers don't realize this then the mythical £170 iPad is taking business from UK sellers, but it's not obvious how HMRC is being denied VAT.

Finally, pedantically, sellers don't pay VAT. Buyers pay VAT and sellers collect it on behalf of the HMRC.

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The trick is to declare the item as a "gift" which tricks the customs into not asking for import duty. I've bought stuff from the states, CDs for example and it exceed £30 so I had to pay duty as they were bought direct from the shop with a receipt, stated up front. I've also bought things from Hong Kong that cost hundreds, you get no box and no manuals, simply put into a plain box or bubble wrapped bag and it states "GIFT" on the outside of the package. With no receipt and no proof that it was a full original first-hand purchase customs can't determine whether it should have duty and it gets through.

This is a common trick for buying grey import DSLRs, read the small print in the eBay ad from China and Hong Kong. You get a genuine article OK but it will say something like "no box or manuals included".

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It isn't as easy as you seem to think.

Also, living in Germany, I suffer from this problem from the other direction. All businesses (even with a turnover of 0€) have to register for VAT (or MwSt as it is called here). Many British businesses sell over Amazon with prices "including VAT", yet they are not registered for VAT, so I cannot get a valid VAT invoice from them. That often means I either can't claim the tax back, or I have to send the goods back and find another buyer that does have a German tax number.

After falling for this a couple of times (and it isn't just British companies, the Chinese suppliers mentioned in the article often do the same scam here), I have turned to calling up the sellers details and checking that they have a valid German tax number in their details.

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Anonymous Coward

Buying from foreign sellers on eBay

Whether the goods you purchase are assessed or not appears to be pretty random. I bought a camera, from a South Korean seller, earlier this year. I did the VAT and duty calculations myself, beforehand, and concluded it would still be a bargain. What happened next was a bit strange. The parcel appears to have been stuck in Parcel Force's bonded warehouse, for over a week, after which it was simply delivered. I blame it on all the Korean documentation 8-).

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Meh

Annoying I did the exact same thing. But to be fair, there is actually an intelligible website explaining this...

It was still cheaper than buying in the UK...

With VAT @20% , perhaps they should do away with income tax...?

P.

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GIFT

Is no guarantee of zero tax/duty treatment neither is second hand nor declared low value. Basically you play customs roulette with a high proportion going under the radar but plenty being caught by hmrc or the courier companies themselves using the admin fees as a profit center.

Plus with declared low value you risk any insurance not paying the full worth should the courier company shag your parcel (hello yodel)

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Silver badge

That is as it should be, given the economies of scale associated with bringing in a large number of item. Of course, had you not been unlucky and your particular shipment had gotten through without being spotted by HMRC, you'd have been up on the deal. No doubt some other buyers did slip through the net.

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Anonymous Coward

Re: GIFT

Years ago I bought some software as a "beta test special offer" for $50 - and by supplying feedback I was then promised a full retail copy shipped to me on release. This duly happened ... except it was checked by customs who saw an enclosed flyer giving the full release's retail price of $100 and they assessed VAT on that!

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You do pay import duty on gifts if they are over a certain value.

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UK and EU customs Union

UK is a member of the EU. That also means it's a member of EU customs union. When you shop anything from other EU member you only pay local VAT (Amazon charges at the VAT rate in your country) that is charged by the seller. If you shop outside EU the import rules that EU has set apply to that you bought.

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Anonymous Coward

Locked off kit..

That's probably because the stuff is already stashed here in the UK and obtained, how shall we say, dubiously through murky channels.

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Re: Puzzled too

True, but when buyers don't pay for kit and disappear, without paying VAT, what's to stop this kit being sold on again at a fantastic margin?

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Facepalm

Sale or gift - doesn't make any difference

Calling it a "gift" doesn't help. Gifts are still subject to tax and duty at normal rates on the declared value.

I know this as a friend of mine sent presents to Poland from Australia for her family. The family had to pay VAT, duty and a handling charge to the post office.

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" I had to pay import duty, VAT, and an admin fee to the courier (which outstripped the taxes). All in, I ended up paying more than just buying from a UK retailer."

That doesn't apply if you buy from inside the EU (My UK-spec FritzBox came from France, with french VAT paid, at 30% less than local pricing)

The non-EU sellers of these devices make it perfectly clear in their sales conditions that the buyers are responsible for all customs and handling fees. Anyone who buys from such suppliers had better make sure their ducks are all in a row as far as pricing goes(*), because if the customs boys spot a heavy sender underdeclaring values then they'll make sure all shipments get checked for a while.

(*) make sure that the price + shipping + vat + handling fee is still cheaper than buying locally - and don't send such stuff via Royal Snail or Parcelfarce as their handling fees are extortionate(**))

(**) UPS or Fedex cost more, but their handling fees are quite low (starting at less than 2 pounds or 10% of the VAT charge, whichever is higher, with a fee cap too)

Some handlers take the utter proverbial: About a decade ago I was stung by customs handling fees when we sent a suitcase from Bangkok to Amsterdam (overweight, containing various personal possessions). The dutch outfit which received it wanted in excess of 500euro to release the case, so we told them to burn it as it was more expensive than replacing the stuff.

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WTF?

vat threshold...

"Currently in the UK, you must register for VAT if your turnover for the previous 12 months is above £67,000, known as the VAT registration threshold."

Not been that for years, it's £81k

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Cameras have been sold this way for a few years. Companies that appear to be uk based (or give the impression) are selling for around 20% less, no mention of VAT on website. Some interesting small print in the terms and conditions states 'you are acting as the importer'.

Usual giveaways are lines to state camera's aren't subject to cash back offers.

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Also posted as "GIFT" with no manuals or original box, that's another rouse to kit from Asia into the UK, it passes under the noses of the customs officers and avoids duty.

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Anonymous Coward

Buyers tax

VAT is a buyers tax, sometimes it is collected for HMRC by the seller, other times it isn't.

Just because the seller doesn't collect it (perhaps he/she is not in the UK) doesn't mean it is not payable.

As long as the seller makes it clear that any duties/taxes are the buyers responsibility, just like the many ebay sites selling cheap tablets from China do there is not a problem.

HMRC can enforce payment of VAT at the entry point if it wishes and as Dr Mouse points out they often do.

It doesn't matter where the purchaser resides it is in the destination that the buyers taxes will apply.

If I live in the UK and buy an item in China and have it shipped to another place in China then no UK VAT would be payable, pricing the item on the website to include UK VAT automatically makes no sense to an international company shipping products all over the globe.

Rather than a call to do something about non-VAT sellers this is either a prompt to HMRC to do their job more thoroughly or a general winge about VAT being too high.

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Re: Buyers tax

But if they are selling on a UK website (E.g. Amazon.co.uk or ebay.co.uk) it is obvious that the sale is going to the UK and therefore they should be registered for UK tax.

The second point is, if they are selling to a UK business, then they that business will surely need a valid VAT invoice in order for it to claim back its tax?

I've been out of the UK too long to remeber how it works, but here in Germany every business needs a valid VAT number and every receipt needs the valid VAT number of the seller. As I stated above, that isn't always the case, on Amazon some sellers (some from the UK) are selling without a valid tax number, which means that I generally have to return the goods - nowadays I generally try and check the sellers details before ordering, so there are no nasty surprises.

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Anonymous Coward

Re: Buyers tax CN22 Fraud

a CN22 is an internationally agreed document stating the value of goods sent by post. To declare an incorrect amount on it, is probably an offence in most countries. But the sending country has little motivation to ensure compliance.

The next question is the receiver legally obliged to report under declaration, morally yes but legally I'm not sure. If the buyers asks a seller to under declare that would certainly be an offence.

I often import from the far east but most of the time the value is under the declaration limit of 15 GBP per delivery. Occasionally it is a bit above that limit but I doubt HMRC are too worried as the cost to process the VAT on say a 20 GBP delivery could be more than the VAT due. Which I could offset anyway as I'm VAT registered.

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Anonymous Coward

Re: Buyers tax CN22 Fraud

"The next question is the receiver legally obliged to report under declaration, morally yes but legally I'm not sure"

Pretty sure this "loophole" was closed a few years ago - if you receive goods that are liable for VAT/duty then you are required to ensure that the correct import declaration has been made or if not I think there is a requirement to inform HMRC of the correct value and failing to do so could probably result in a criminal prosecution

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Re: Buyers tax CN22 Fraud

"The next question is the receiver legally obliged to report under declaration, morally yes but legally I'm not sure. If the buyers asks a seller to under declare that would certainly be an offence."

The problem is that the seller may well declare their cost of replacing the thing.

I've had chinese suppliers ask if I want them to underdeclare. My standard response is "Please don't. If you do and UK customs notice, they may seize the package" - it's also worth noting that HMRC intercept and seize a lot of counterfeit kit coming into the UK in general parcels (the claim is "thousands per day") or may pass it through and track where it's going to if they suspect an organised operation.

Upshot is that if you spend your hard-earned on a genuine OEM Apple IPid, you may end up out of pocket and device-less too.

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Caveat Emptor?

so you splash the cash for one of these.

What happens when you get it and after paying the Import duty is fails to work?

What if is is like those 8GB USB Sticks that only had a 1GB capacity

Then there is the issue of warranty

Grey Import? Apple/Nikon/Canon/etc will just laugh at you and send you on your way.

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Re: Caveat Emptor?

Works for Apple devices still, because Apple have a worldwide support. Their mode of operation is if it's legitimate Apple kit, they will service it at the nearest Apple Store. I've had UK kit serviced in the US and kit purchased in the Netherlands serviced in the UK. So it's slightly less risk for Apple devices. But your point still holds, there is still a significant risk. What if the device get's hit for import duty and VAT as it comes through customs (in which case you have to pay it), but arrives broken?

Indeed I once had a broken iPad delivered and I even saw one UPS delivery man throw the package off the van to another man, he caught it fine, so I have no evidence it was that particular pair of clowns who damaged it, but it was still very annoying to have witnessed their behaviour and then, on opening the (damaged) iPad box, find the corner of the device had been bent out of shape and that the front glass had popped out. On the iPad 1 quite an impact would have been required to do that.

If you return it, will the seller replace it? If there are problems, HMRC are hardly likely to refund your VAT, or if they do, I'm sure the form filling and admin will take so long as to hardly be worth it.

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Re: Caveat Emptor?

Hopefully we'll get enough people stung by dodgy imports that they stop trying to buy the absolute cheapest and switch back to buying from proper companies.

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Here's how it works

It is perfectly legal to sell the items from outside the UK without VAT, but then you have to pay import duty and VAT on top when it goes through customs.

The problem is that there is a self declarations of the value of the goods. It is standard practice when buying from China for them to write on the customs declaration that the value is under $20 and is a gift, therefore no VAT or duty is paid. The people in China don't care, customs can't touch them. HMRC can't open each package to check. In the end it's a bit of a mess with no easy solution.

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Anonymous Coward

Re: Here's how it works

The exporter can write whatever he likes on the outside of the package sufficient to get the package out of the originating country.

As the purchaser will be the importer it is up to the purchaser to notify HMRC of the value of any items and arrange to make payment of any duties/taxes payable.

Non or Mis reporting of values by the importer for the purpose of evading tax is illegal

HMRC would argue that extending the detection of evasion to include all imports would be so costly that general taxation would have to rise and so the current situation is the best compromise.

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Re: Here's how it works

"The exporter can write whatever he likes on the outside of the package sufficient to get the package out of the originating country."

Having dealt with some high-value imports from china recently:

Items with a declared value above about US$1500 (from memory) have to have export approval. This adds costs and delays so a lot of merchants offer to declare below this value to speed things up.

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Mark as gift with value lower than the threshold

That's how it's done. Far too easy. Quick fib on the declaration and nobody in the UK can compete. I would argue that genuine UK businesses need more protection than that.

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Anonymous Coward

Re: Mark as gift with value lower than the threshold

Think they changed the law a few years back so that the recipient is required to ensure correct tax/duty is paid. So if an iPad is declated as a £30 gift then the recipient is legally obliged to inform HMRC of the "error" and pay the correct amount. So if HMRC require eBay to hand over the buyer details of some of these suspicious items and do a high profile sending out of payment demands (along with prosecutions where necessary) then people may be more careful of how they order from overseas.

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2 sides

I used to work for an equipment distributor in the UK. The policy was that grey imports only got support on a chargeable basis. This pissed off a few customers who thought they'd got a bargain.

Yes the UK price was higher, partly through tax and partly through the cost of support. The overseas sellers had neither of these expenses.

On the other hand I've been happy to buy kit from abroad. I know there is a risk, especially DOA, but as an engineer I chance it.

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Re: 2 sides

Disties generally won't support equipment not bought through them regardless of its origin.

Refusing or charging for warranty work on "grey imports" also pisses off a lot of customers who bought equipment quite legitimately OS. You can't tell the two apart in practice and if the brand is big enough to have local representation they probably have an international warranty.

That's why most service agents just do the work.

I've only had one problem personally. That was with the local service agent for a Japanese manufacture of third party camera lenses (hint: greek letter, starts with S, rhymes with smegma) but a phone call up the chain fixed that. That was some years back.

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1. Sometimes a far east ebay seller will package in such a way as to make VAT and duty unlikely, and offer to reimburse any vat and duty levied. You have to send them the paperwork after you've been charged, and they reimburse. The fact that they're willing to indemnify against HMRC doing their job shows that HMRC don't usually do their job.

2. Dripping with integrity as I am, I did once try to pay the VAT and duty HMRC had failed to levy. They didn't want it.

3. A previous poster has said Apple has worldwide warranty. Not quite true. Worldwide for portable equipment, country of sale for non portable.

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What's the problem?

Use Apple's Education Pricing, & buy the stuff for your 'offspring' who's at school / college / university.

Remember, the discount increases, the further up the education tree they climb.

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Re: What's the problem?

To quote their website:

"Shop at the Apple Store for Education and save up to £159 on a new Mac, and up to £26 on a new iPad"

20% of a £200 iPad is a bit more than £26.

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Bronze badge

This isn't even your analysis

This is a MIRROR analysis. Borrowing text straight off the Mirror article is just not cool. You, The Register, should know better. As for 'not naming the business', anyone looking at the Mirror article can figure it out themselves. This is shoddy "journalism", giving real journalism a bad name.

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Anonymous Coward

In the past an Amazon Partner was not disclosing that they were sending things from the USA. I complained to Amazon that this was likely to land people with unexpected HMRC costs. Amazon couldn't see the problem - and the retailer was apparently allowed to continue with their misleading entries.

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Amazon are a pain

It can be nigh impossible to find out if an Amazon seller is based in the UK. I've complained to Amazon too and they seemed to purposely misunderstand my complaint. Even eBay goes to the trouble of stating clearly where the goods are coming from (and it's mostly reliable). I complained to Bezos and one of his minions gave me a very polite worded finger. If I'm spending more than a few quid, or I want the stuff in a hurry, I only buy from sellers with a UK address.

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Re: Amazon are a pain

eBay are just as bad, and worse they don't indicate which sellers are VAT registered. If you're buying for a business it makes a big difference, but frankly it's a crapshoot as to whether you get a VAT receipt or not.

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"I complained to Amazon that this was likely to land people with unexpected HMRC costs. Amazon couldn't see the problem "

Amazon don't give a monkeys

There is a huge amount of counterfeit kit selling on Amazon vs buying on Ebay - and the difference between the two when it comes to reporting fakes is night and day (Ebay can and will suspend vendor accounts whilst investigating AND will clawback what's been paid if the claims are validated)

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Silver badge

This is another one of those situations...

...where the world is just too small a place for regulations and practices that worked fine when it was 'much larger'.

Like "this content is not available in your country!" Okay I'll look it up in HD on YouTube!

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Anonymous Coward

an outrage

It's appalling that the little guy can avoid 40 quid or more VAT on a purchase like an ipad.

As a super-rich non-dom who has been proudly not paying tax while living in a 15m pound mansion in London for well over a decade, I will certainly raise the issue with the PM at the next 4000 quid per seat conservative fundraiser. I was quite specifically assured by George Osbourne that nobody worth less than 20 million would be getting off their fair share, and I am sure Gary Barlow will be happy to back me up.

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