back to article HMRC 'reluctant' to crack down on VAT fraudsters – tax ace

HMRC could be reluctant to crack down on VAT fraudsters selling goods online without declaring VAT because of the costs involved, a European tax expert has claimed. Rita de la Feria, a professor in tax law at Durham University, claimed that Amazon and eBay may be liable for VAT if they do not take due diligence and ask …

  1. This post has been deleted by its author

  2. Anonymous Coward
    Anonymous Coward

    Small deals

    It will cost in basic transactions from 50GBP to collect a VAT transaction so the smaller players are not worth chasing if the reward is less why chase it.

    Aus just went through the pain of this calculation as it is about $A100 in customs costs for a import so at 10%VAT/GST let all the small parcels in VAT/GST free as it is cheaper in currency terms. A lot of local traders complained and as of the next few months all the import VAT/GST will be collected as it works better politically.

    1. Your alien overlord - fear me

      Re: Small deals

      What if I sell you a £600 smart phone but charge you £49.99 for the screen, £49.99 for the battery etc. etc. ?

      Personally I wondered by those Hong Kong eBayers claimed to have UK stock and didn't charge VAT. Perhaps UK based sellers should register themselves in Hong Kong and do the same?

      1. Sirius Lee

        Re: Small deals

        Your comment may not be relevant in this context. Any businesses with a UK registered company or an individual can hold stock in the UK and not have a VAT number because companies are very cheap to setup (~£30) and HMRC allows up to 85K of sales of physical goods in a year before VAT registration is required (the rules for digital goods are different and require VAT registration if there is even one to a buyer in another EU member state). If a registered company is reaching its limit the owners can transfer the on-line 'brand' to another registered company and carry on. End users will probably see no difference. It's a hole that can be exploited but it comes with it's own costs because, for example, even dormant companies have annual costs such as the need to file an annual account.

        So back to your point. It's relevant if Hong Kong has a similar threshold for its sales tax and foreigners are able to register and run a local business at virtually zero cost. Is this possible?

  3. Anonymous Coward
    Anonymous Coward

    Corporate tax, or VAT?

    I can bet the discussion is more likely about where the money is?

    Do HMRC chase down Amazon,ebay etc for their corporate taxes, at which point they'll do the bare minimum to help HMRC with their marketplaces.

    Or, do HMRC give them an easy ride about their own tax affairs with a nudge and wink so long as they help crack down on VAT dodgers.

    1. wolfetone Silver badge

      Re: Corporate tax, or VAT?

      HMRC have around 3,000 agents assigned to finding out the members of Joe Public who don't pay their taxes properly (or at all).

      HMRC have around 300 agents assigned to finding out the companies to avoid/evade paying corporation tax.

      I think it's more down to who HMRC's/George Osbornes' friends are, not who has the most money unfortunately.

      1. Stuart 22

        Re: Corporate tax, or VAT?

        This is bad for small business customers too. Sometimes one has to source using eBay or Amazon for niche products. We have been diddled many times by buying from companies that appear to be UK but aren't and can't or won't produce a VAT invoice. Hence we end up unexpectedly paying 20% over the odds by being unable to reclaim the vat when we could have saved money buying from a vat registered company whose headline price was higher but ex vat price was much lower.

        Its also pretty obvious that even some uk people/organisations must be over the vat threshold and playing the same trick.

        1. VinceH

          Re: Corporate tax, or VAT?

          I frequently tell clients to consider this when buying from Amazon. If it isn't clear that the Amazon seller is VAT registered, look elsewhere and way up the difference in price versus the amount of VAT they might not be able to reclaim. So far, nobody has heeded my advice. Presumably because "effort".

          1. VinceH

            Re: Corporate tax, or VAT?

            "way up" ? Weigh up, you pillock! I'd downvote you if El Reg would let me!

      2. d3vy

        Re: Corporate tax, or VAT?

        wolfetone

        There are fewer companies than people...

        I don't think I need to explain that further.

        1. wolfetone Silver badge

          Re: Corporate tax, or VAT?

          "There are fewer companies than people...

          I don't think I need to explain that further."

          That's true, but the tax affairs of companies tend to be far more complex than those of the ordinary self employed person. I may have one accountant do my tax return, I certainly don't need 5 of them to do it. But a charity I used to work for would be audited and there would be 6 of them doing the job.

          So yes, there are more people than companies, but you need far more people to check up on a company than you do an individual.

  4. RPF

    VAT needs to be scrapped and have an individual- or company-wealth tax replace it.

    So much easier and will promote buying and selling ("the economy").

    Guess the multi-millionaires in parliament don't want that, though the current system is clearly unfit for purpose.

    1. nematoad

      No chance

      I don't think that the "multi-millionaires in parliament" have much say in the matter.

      VAT is an EU tax and getting it changed would mean unanimity with all EU members. That's a not a reasonable prospect as it involves the equivalent of herding devs (or cats if you prefer).

      1. My Alter Ego

        Re: No chance

        This opens an interesting question - is herding fat cats easier or harder than herding their less plump siblings?

    2. jonathanb Silver badge

      VAT actually works very well in terms of collection cost vs amount collected.

      1. Anonymous Coward
        Anonymous Coward

        VAT actually works very well in terms of collection cost vs amount collected.

        Only if you aren't counting the costs incurred by all the small businesses in the chain, of course. It's cheap for HMRC since they don't pay for it.

        1. jonathanb Silver badge

          It's a lot easier for companies to do their VAT return than for example their Corporation Tax return.

  5. Anonymous Coward
    Anonymous Coward

    (amazon) we don't have the authority to review their tax affairs.

    this is, naturally, a red herring. They DO have tools for simple math, such as: "ships from the UK + VAT number = allowed to sell" (ah, but that would make them so much less money than now!). And, presumably, real VAT numbers are held on a database, even if not publicly available, it would be trivial for ebay and amazon to say: hey, taxman, give us access to current VAT database, just the numbers v. identifiable business data, so we can police it better". The thing is though, it would be not only against the basic interest of ebay and amazon, but also against the most basic reaction sof customers, who will ALWAYS want more toys for less money.

    p.s. on top of genuine loss to small EU retailers suffering from unfair HK and Chinese competition, there's EU and particularly UK retailers daydreadming about the good old days of profiteering from tightly restricted supply of goods, which they can then overprice and blame it on vat.

    1. d3vy

      Re: (amazon) we don't have the authority to review their tax affairs.

      You know that companies don have to be VAT registered to trade in the UK don't you? Until they turn over more than £150k in a 12 month period...

      So are you suggesting ebay stops individuals and small companies trading?

      1. zebm

        Re: (amazon) we don't have the authority to review their tax affairs.

        £82,000 is the VAT registration threshold. Obviously a lot of these small foreign traders won't cross that line - perhaps they should decrease the threshold or put in place a proxy system.

        1. d3vy

          Re: (amazon) we don't have the authority to review their tax affairs.

          "£82,000 is the VAT registration threshold."

          Of course it is... I was thinking of the FRS threshold!

    2. d3vy

      Re: (amazon) we don't have the authority to review their tax affairs.

      Oh and that database you're talking about... Exists, a two word search in google and you'd have known that.

    3. jonathanb Silver badge

      Re: (amazon) we don't have the authority to review their tax affairs.

      VAT numbers can be checked here - http://ec.europa.eu/taxation_customs/vies/

      If a customer from another EU country gives you a VAT number to claim exemption from being charged VAT, you are required to check it there before zero rating the sale.

    4. Anonymous Coward
      Anonymous Coward

      Re: (amazon) we don't have the authority to review their tax affairs.

      ...And, presumably, real VAT numbers are held on a database, even if not publicly available...

      Errmmm... every single registered VAT registrant in the EU can be checked in seconds on the VIES database run by the EU... and other VAT-registered businesses wanting to safeguard their position can enter their own VAT registration number and obtain a cryptographic "hash" that proves their due diligence in checking. The VIES database is available online for all, pretty much 24x7.

      Oh, and by the way, if anyone is interested, without a shadow of a doubt Amazon is complicit in all this because they not only advertise traders' products and ship their (sometimes shoddy) products from UK fulfilment centres, but they also actively hide their identities so that fraudsters can trade completely anonymously. Don't believe me? Check the EU requirements on traders to disclose key information (name, registered office address, registration number, etc., etc.) about their identity [implemented in UK domestic legislation as The Company, Limited Liability Partnership and Business (Names and Trading Disclosures) Regulations 2015, made in accordance with the Companies Act 2006 - see Regulation 25 specifically] and then tell Amazon that the trader isn't complying and won't respond to any messages requiring these details. Amazon's finest call centre gophers will come back to you and tell you that the trader hasn't responded to their attempts to communicate with them either, so there's nothing that can be done!!

      I bought a Christmas present from an Amazon supplier but didn't get a VAT receipt, in fact I got no receipt whatsoever, and I have no idea from whom I bought it - the name given on the Amazon site is a company that ceased trading over two years ago and whoever is behind the operation hasn't responded to any requests for their identity. So I have no consumer rights and can do nothing should the goods fail in any way whatsoever. And although Amazon processed the credit card transaction for the anonymous fraudster, sent the goods on behalf of same, and isn't offering their (worthless) "A to z Guarantee" for this purchase, it's "nothing to do with them"...! Well, not until you pass full details to your credit card company for a purchase over £100 and request a full refund courtesy of Section 75 Consumer Credit Act 1974, it isn't. When Amazon starts squawking and asking for the goods back after I get the refund (or have to recover it from the credit card company in the County Court using Part 27 proceedings), my intended action is to tell Amazon "please see your e-mail confirming that it's nothing to do with you" and blank them thereafter...

  6. Androgynous Cupboard Silver badge

    Bullshit

    eBay at least provides no way to identify if the price you're paying includes VAT. This is a pain in the arse if you're buying on behalf of a business as it makes cost comparison very difficult.

    I would love to see HMRC lean on them.

    1. Anonymous Coward
      Anonymous Coward

      Re: Bullshit

      It often does, on the listing go to the bottom and click the seller info which shows their address and contract details. If vat registered it will say here, many are.

      One point to note though is if buying anything non-brand new the settlers all often be on the vat margin scheme meaning they only charge vat on the profit element not the entire cost so there won't be anything you can claim back.

  7. Anonymous Coward
    Anonymous Coward

    This is a road to a bigger issue

    All very well muttering about Ebay, Amazon but this compliance would also have to apply to Craigslist, local newspaper classified etc etc.

    Unless all sellers for all channels have to provide their passport number when registering to sell their business could never realistically be challenged. This would be in spite of making individual listing companies do some due dilligence.

    Apart from review/reputation you could set up a new channel and/or identify every few weeks too.

    Unless the whole VAT process is turned upside down (i.e. the listing companies have to collect then pass on or pay the tax) then the problem will only get more complex.

    Although I sympathise with the frenzy of bashing the tax and business models of the big internet firms cant really see them all suddenly expecting UK levels of "Know your Customer" verification for any listing from anywhere on the planet.

    1. d3vy

      Re: This is a road to a bigger issue

      Not really... You don't pay VAT as a private individual if youre selling second hand goods as long as they were not specifically bought to be sold on.

      1. jonathanb Silver badge

        Re: This is a road to a bigger issue

        And if they were bought to be sold on, the 2nd hand margin scheme applies and the buyer can't reclaim the VAT on the purchase.

    2. Joel Mansford

      Re: This is a road to a bigger issue

      Sorry, but you're outright wrong. Amazon is very different to a classified ad since you're giving your money *to Amazon*, you're relying on the listing *on Amazon* and all communication with the vendor is *through Amazon*. Finally the goods are often dispatched *by Amazon*

      Customers pretty-much think they're dealing with Amazon as a result of them inserting themselves in every interaction you have with the so-called "vendor". To me Amazon starts to look more like an 'agent' or middle-man. Lettings agents are obliged to give all landlord's details to HMRC, any reason Amazon shouldn't be doing the same?

  8. zaax

    VAT would have been charged at the point of entry for UK held stock, but VAT would not have been charged on the profit. ie the difference between 1p and 99p

  9. s. pam Silver badge
    Facepalm

    HMRC Goon Squadies would rather bugger taxpayers

    The Goon Squadies would rather bugger the likes of you and me for small mistakes by driving a Eurostar train up our backsides than actually do something that could grab the real criminals.

    I've just finished the end of a 4 year nightmare with them for a £202 mistake. End result was a £9,100 fine, yet they won't get off their arses and go after YodaPhone, Amazon (hint: they're in Dumfermline Scotland HMRC) or others.

    Scum.

    1. HAL-9000
      Megaphone

      Re: HMRC Goon Squadies would rather bugger taxpayers

      Too true, grinding small people into the dirt is always cheaper and easier when compared to pursuing the real tax dodging criminal low life scum that openly do business with untarnished bank accounts and good reputation. Makes me sick too. Have an up vote, it's the least

  10. Eclectic Man Silver badge

    Personal purchase Scams

    Two scams (neither of which I availed myself of):

    1 The (overseas) seller of new goods sends the item and the original packaging separately. The item is sent as 'returned' or 'repaired' goods, so avoids v.a.t.

    2 The (overseas) seller sends an invoice or receipt for substantially less that the amount paid thereby reducing the amount of v.a.t due on importing into the UK.

    As I have done some work for HMRC, I let them know the details, but they were not interested as the amounts were too small.

    One was a US company, the other from Hong Kong. Typically used for small high value items like prestige cameras, lenses, and binoculars.

    (I'm guessing that were the items defective, getting a full refund would be very difficult - "Sue me then, do you want to admit in a Court of Law that you conspired to defraud HMRC?")

  11. Anonymous Coward
    Anonymous Coward

    VAT Invoices

    I wonder why companies don't pass VAT receipts by default.

    It is infuriating.

    Are they saying that all receipts that aren't VAT valid will be deleted from the POS software and the tax not paid?

    Because that's what it looks like to me.

  12. terry doyle

    Why is there VAT on transactions at all?

    Exactly what does the Government do in the transaction?... Nothing at all.

    You already paid up to 50% income tax on the money you are spending .. and now they want a further cut of it just because you are helping stimulate the economy by actually engaging in trade.

  13. Joel Mansford
    WTF?

    What about those that fraudulently *charge* VAT?

    I bought a phone via my ltd company from Amazon from one of their marketplace sellers. I subsequently requested a VAT receipt. The supplied receipt showed a US address (even though the item had come from the UK) and had VAT listed at 20% but, as you'd expect had no VAT number rendering it invalid.

    As a VAT registered business this means that the phone was actually more expensive than other suppliers on Amazon. Amazon have been useless and the supplier is still trading on Amazon.co.uk defrauding customers and UK plc.

    It's very easy to verify a company's VAT status and I can see no excuse for not doing so.

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