Chinese eBay sellers with UK based stock

[Beachbum]

I sell on eBay - I'm a UK LTD VAT registered company. In the last year our sales have dropped from £45k to £15 per month because of Chinese sellers undercutting us in our market sector. I have just laid off all my staff and now struggling to keep my company afloat.

The Chinese's sellers are now dispatching stock from the UK using UK based fulfillment centres.

After a little research & eBay shopping I identified 20 of the top 30 sellers in my sector were all Chinese companies dispatching from the UK, had Chinese businesses, addresses and contact details listed under their business information on their eBay listing pages. None displayed VAT numbers.

The twenty sellers all exceed the VAT threshold for sales generated by the UK based stock, with combined sales of around £24,000,000 a year.

Only 1 seller was able to provide me with a vat invoice - but without a UK address. The rest of them told me they were not VAT registered because they were Chinese companies.

So 19 are illegally trading from the UK without registering for vat - accepting that £1,000,000 of sales generated from sales on UK based stock takes them over the vat threshold.

Apart from the obvious vat fraud & PayPal money laundering, what are the UK business laws for foreign companies with no physical or formal place of business in the UK that are selling their stock based in the UK via fulfilment warehouses to customers in the UK.

Do they need to register their business in the UK and get a valid UK registered company?

Are they allowed to simply register their Chinese company for vat and continue trading UK based stock?

Do they need to register a formal legal place of business in the UK or can this be their Chinese business address?

Do all the sales revenues for goods located & purchased in the UK need to end up in a UK banks?

How does the customs & excise work when they send their stock to a UK fulfilment warehouse.

Hope you can help

 

[paulears]

I'm no expert, but if somebody has a warehouse and simply gets paid to ship out stock, they may fall under the VAT threshold, but they are essentially freight forwarders, and the buyer has no contract with them at all, they receive payment from abroad. So their VAT status isn't important is it?
Customs wise, somebody pays at the point of entry, and probably not the end user.

The UK part would just be another business, who receive containers and post packages. They would pay tax based on their figures. I appreciate your concern, as I've been hit in a similar way, but it's a small part of my business and absorbable. I can't see they're actually doing anything wrong though?

 

[beasty]

Why not just ring HMRC for a definitive answer?

Seems obvious you can get the info from the horses mouth and hopefully from your point of view force them to either pay vat or stop selling on ebay, if VAT is due it would be your duty to pass the info on to EBAY AND HMRC

 

[Pish_Pash]

I've a similar problem...but with Amazon UK fulfilment centres..

Until quite recently I had a monopoly on the stuff I was selling (from Asia) ...sure, there were sellers selling/posting the same products from Asia also listed on Amazon, but nobody in the UK. Then about 4 weeks ago, I noticed my Amazon sales were plummeting...sure enough there's now one of these Asian sellers sending over from Asia direct to Amazon UK warehousing (i.e. using 'fulfilled by Amazon'). Since Amazon are now fulfilling the same products by both this other seller & myself, the only differentiator for punters is price...his cost base is lower but more importantly, he ain't paying full VAT on the retail price, so I can't beat him on price - I'm pretty much screwed.

To say I'm miffed is putting it mildly...for one, I'm wholly convinced that since - it's the overseas seller himself - that completes the accompanying import paperwork for the UK port of entry, he'll be way under declaring the value of the shipment (it's not like HMRC can investigate & correlate the valuation of stock against his bank statement to see if that's what he paid), therefore he's paying a pittance wrt VAT at the point of entry...essentially he can always undercut me about about 15% (or thereabouts)....and still trouser the same as me.

I had someone email this particular seller as a potential customer & asked if he could provide a VAT receipt, his answer was "We do not have a VAT number...ask Amazon!" ...so I reported him to Amazon who didn't give a damn (apparently not content with paying zilch to HMRC themselves, it seems - in the face of clear evidence - they don't want to police their own overseas sellers that they are encouraging to send stuff to the Uk for selling out of Amazon UK warehousing).

Frankly UK sellers don't stand a chance in the new wild west that is ecommerce....the dynamics of the genre are moving sooo fast that authorities (nor the marketplaces themselves), can barely keep up & therefore don't have the regime/policies in place to police....HMRC is missing out on a vast amount of revenue...to the detriment of the UK taxpayer, but also to the detriment of UK based business (who can't compete on a level playing field). I really wish someone 'who can make a difference' (politician etc), would run with this little spoke of issue ...it'd be a great vote winner (cos nobody likes tax cheats, nor Amazon!)

 

[silvermusic]

Why not just ring HMRC for a definitive answer?

Seems obvious you can get the info from the horses mouth and hopefully from your point of view force them to either pay vat or stop selling on ebay, if VAT is due it would be your duty to pass the info on to EBAY AND HMRC

It wouldn't be the first time by a long way this subject has come up, on this board and others I've seen including those on eBay and Amazon themselves. The bottom line seems to be HMRC aren't interested either because of lack of manpower or they're only interested in big fish that are easy to catch.

As for the answer I don't know, but I really feel for the OP. On a much smaller scale I know how it feels to have your business rolled over by a one or several juggernaut businesses with whom you can't compete on price. Bottom line is you're not going to beat them on price, and as you know eBay and Amazon buyers are for the majority price whores simply selecting the cheapest option.

Competing against Chinese sellers on product sourced from China for the most part is never going to be a long term way of working. Certain markets such as electronics and electrical accessories are flooded, must be a horrible market to be in.

One option I've seen done by someone I know is to re-invent your business, he use to sell blank media and computer accessories, was one of the first decent sized players on eBay/Amazon too, in his words "it was good while it lasted". He turned over many millions and made a healthy margin in the seven years he was in that trade. But it came to the point when profit was non-existent and throwing money at a failing business model made no sense. He sold all of his remaining stock to competitors for whatever he could, downsized and reinvented the company and started selling completely different products that weren't mass produced commodities from abroad. Several years on he's making good profits on much less turnover and employing four other people. It's a bit different from the days when he had 40-50 staff on the payroll with a huge warehouse turning over millions a year, but he's a much happier person all round.

 

[Pish_Pash]

The bottom line seems to be HMRC aren't interested either because of lack of manpower or they're only interested in big fish that are easy to catch.

In my opinion - from HMRC's perspective, they're could be any 'lower hanging fruit' (from a tax collection perspective) than just to give a missive to Amazon like thus...

"We require Amazon UK to enforce mandatory checks on all your overseas sellers using your 'Fulfilled by Amazon' fulfilment service...

1. Ensure such overseas sellers are declaring the true value of the shipment into the UK, by requiring them to email the Amazon UK FBA team the PO for their goods with supporting bank statements (to verify the 'point of entry' shipment valuation is valid). Without these accompanying documents, you should refuse to accept the shipment.

2. Inform us (HMRC) whenever their such overseas sellers breach the UK VAT turnover threshold.

Sure, step 1 is a huge administrative burden for Amazon...but at the minute they are just shrugging their shoulders & essentially saying "It's not us guv'"...but actually, they are a massive part of such a 'tax avoidance' wheeze, by allowing overseas sellers to duck VAT/Import duty by under declaring the goods at the point of entry. There's no such thing as a free lunch...so if Amazon want to collect earn revenue by providing a fulfilment service for such overseas sellers, then they better roll their sleeves up & do some checks (in much the same way as financial bodies are obliged to meet anti money laundering rules)

Step 2 is so simple for Amazon to do ...completely automated (they know exactly how much each seller has sold, once VAT threshold has been breached automatically email the HMRC & disable the sellers Amazon's account until he provides the necessary VAT number.

It needn't be just Amazon...but any UK fulfilment service (i.e. like those being used by Ebay UK Chinese sellers) ...end result, is a truly *massive* boost for UK coffers & a fading away of impossible competition from speculative chancers...hey it would even fight deflation (on account overseas would have to increase prices to make a profit), w& deflation seems to have every central bank cacking their pants...it's a festival of win.

 

[Beachbum]

After a little bit of research I found the vat rules for businesses or persons not established in the UK. The Vat office calls it non-established taxable persons (NETPs).
Unfortunately I can't post links to websites as I'm a new member

Search google for

Removal of the VAT registration threshold for businesses which are not established in the UK

"To note that, from 1 December 2012, non-established taxable persons (NETPs) will no longer be able to benefit from the UK VAT registration threshold. They will be required to register for UK VAT when they make their first supply of goods or services here regardless of the value"

So any foreign company trading goods in the UK needs to register for VAT. All VAT registered companies need to display their vat number

So any foreign company on eBay or Amazon dispatching goods from the UK needs to display their VAT number.

Seems to be that eBay & Amazon need to take a look at this and make sure all their NETP's display their Vat numbers. If they don't have Vat numbers then they shouldn't be allowed to trade stock in the uk...

 

[Pish_Pash]

Nice one beachbum, I'm just about to contact my competition (who is based overseas), with an email along the following lines...
___________________________________________________________

Re your comment in response to my request for a VAT receipt from you....

>> "We do not have VAT registered code number in EU".

Therefore you are contravention of UK HMRC VAT policy regulations. For your reference....

http://www.hmrc.gov.uk/briefs/vat/brief3112.htm

Removal of the VAT registration threshold for businesses which are not established in the UK

"To note that, from 1 December 2012, non-established taxable persons (NETPs) will no longer be able to benefit from the UK VAT registration threshold. They will be required to register for UK VAT when they make their first supply of goods or services here regardless of the value"

The above means that since 2012, there is no VAT threshold for overseas sellers (i.e. those not based in the UK)...if you supply goods for retail in the UK from overseas, you *must* have a VAT number & include/collect VAT @20% on every sale. You must also display your VAT number.

I will be reporting your breach of VAT regulations to both Amazon UK & the UK tax authorities.
______________________________________________________________

 

[silvermusic]

Nice one beachbum, I'm just about to contact my competition (who is based overseas), with an email along the following lines...
___________________________________________________________

Re your comment in response to my request for a VAT receipt from you....

>> "We do not have VAT registered code number in EU".

Therefore you are contravention of UK HMRC VAT policy regulations. For your reference....

http://www.hmrc.gov.uk/briefs/vat/brief3112.htm

Removal of the VAT registration threshold for businesses which are not established in the UK

"To note that, from 1 December 2012, non-established taxable persons (NETPs) will no longer be able to benefit from the UK VAT registration threshold. They will be required to register for UK VAT when they make their first supply of goods or services here regardless of the value"

The above means that since 2012, there is no VAT threshold for overseas sellers (i.e. those not based in the UK)...if you supply goods for retail in the UK from overseas, you *must* have a VAT number & include/collect VAT @20% on every sale. You must also display your VAT number.

I will be reporting your breach of VAT regulations to both Amazon UK & the UK tax authorities.
______________________________________________________________

Why bother to email them and alert them? Just get onto HMRC. Personally speaking the last people I'd want to upset are those who have little regard for the law in the first place, if you get my drift.

 

[Deleted member 59730]

I have always said, from day one of VAT, that there should be no threshold before registration. Having a VAT threshold defies all logic.

 

[Pish_Pash]

Why bother to email them and alert them? Just get onto HMRC. Personally speaking the last people I'd want to upset are those who have little regard for the law in the first place, if you get my drift.

Because knowing how slow the wheels of HMRC turn, it'll take yonks.

I'm not so sure they have litte disregard, they might not even be aware (because Amazon aren't policing them) ...it wasn't even clear to us & we live here & English is our first language!

If I were in their shoes, knowing someone was about to bubble be me up, I'd cack myself, because HMRC can simply ask Amazon UK how much in Sterling the seller has sold (i.e.since Amazon have been fulfilling for them) .....which will be a chunky amount of unpaid VAT (+ a fine)

I'd also like to put the heat on Amazon, so was thinking about contacting the broadsheet newspapers (this is a gift of a story ...more dirt associated with amazon "Amazon fulfilment scam costing UK taxpayer millions & to the detriment of UK business who are fairly paying their taxes" blah blah.

It really is an outrage...Amazon are aggressively seeking overseas (non EU) sellers using Amazon.com Amazon.jp Amazon.com.au etc to use their Amazon UK fulfilment service, but Amazon have very lax procedures in place to ensure that the overseas seller is UK VAT registered.

 

[paulears]

I'm really sorry, but when you send money to a foreign country, I don't see that you are going to get a receipt to enable you to reclaim VAT when you haven't actually been charged any? Surely it's like when you buy from somebody in the UK, you assumed was VAT registered, and they weren't?

The Chinese company charged you £100, with no VAT because it doesn't exist in their country. As the UK Government didn't receive any Tax, you can't reclaim any. Isn't this similar to buying from a European VAT registered company? They don't charge VAT and you can't claim it back.

You didn't pay a UK company did you?I'm assuming you paid China or wherever?

I always thought the NETP applied to foreigners in business here? Not in business elsewhere?

Let us also remember that UK laws don't apply to foreign Countries. In all my trading with China, any VAT came from the delivery service here, UPS, TNT, Fedex etc. They pay import duty and VAT to the Government, on my behalf. When the goods arrive in the UK, somebody presumably is paying the VAT and duty due on import. That person isn't you, is it? So somebody will be paying it.

I don't see how you can threaten somebody with UK law. You do not know if VAT is being paid or not, but a warehouse shifting a lot of product will be unable to get the imports unless the tax and duty is being paid some - will they?

The 19 firms you use in the example - do they all actually receive the buyers funds in the UK? I always thought that you paid the money to the overseas end, who then delivered from stock held in the UK - and that surely is different?

If I had a warehouse of stock, and received emails detailing UK addresses to send things to, and got paid for my time and effort, then if a foreigner paid me to do it, am I actually the seller? I don't think so.

I have exactly the same problem, as I mentioned before - but I can't see they're doing anything illegal based on just posting goods.

 

[Pish_Pash]

Without wanting to hijack the thread. Amazon are advertising the product for the overseas seller, Amazon are collecting the money for the overseas seller, amazon are fulfilling the product out of the UK for the overseas seller ...the seller is sending goods to Amazon UK for them to fulfill out of their UK warehouses, therefore I believe the seller falls under the following guideline...

"To note that, from 1 December 2012, non-established taxable persons (NETPs) will no longer be able to benefit from the UK VAT registration threshold. They will be required to register for UK VAT when they make their first supply of goods or services here regardless of the value"

Therefore there shouldn't ever be any non EU sellers on Amazon without a UK VAT number - but not many overseas sellers have...it's costing HMRC wads in lost VAT....but more importantly it's costing me in lost sales (as my Amazon overseas seller competition can undercut me by some margin)

 

[Raw Rob]

I'm really sorry, but when you send money to a foreign country, I don't see that you are going to get a receipt to enable you to reclaim VAT when you haven't actually been charged any? Surely it's like when you buy from somebody in the UK, you assumed was VAT registered, and they weren't?

The Chinese company charged you £100, with no VAT because it doesn't exist in their country. As the UK Government didn't receive any Tax, you can't reclaim any. Isn't this similar to buying from a European VAT registered company? They don't charge VAT and you can't claim it back.

You didn't pay a UK company did you?I'm assuming you paid China or wherever?

I always thought the NETP applied to foreigners in business here? Not in business elsewhere?

Let us also remember that UK laws don't apply to foreign Countries. In all my trading with China, any VAT came from the delivery service here, UPS, TNT, Fedex etc. They pay import duty and VAT to the Government, on my behalf. When the goods arrive in the UK, somebody presumably is paying the VAT and duty due on import. That person isn't you, is it? So somebody will be paying it.

I don't see how you can threaten somebody with UK law. You do not know if VAT is being paid or not, but a warehouse shifting a lot of product will be unable to get the imports unless the tax and duty is being paid some - will they?

The 19 firms you use in the example - do they all actually receive the buyers funds in the UK? I always thought that you paid the money to the overseas end, who then delivered from stock held in the UK - and that surely is different?

If I had a warehouse of stock, and received emails detailing UK addresses to send things to, and got paid for my time and effort, then if a foreigner paid me to do it, am I actually the seller? I don't think so.

I have exactly the same problem, as I mentioned before - but I can't see they're doing anything illegal based on just posting goods.

I'm following this because I'm interested, but don't fully understand it. But I think you're missing the distinction between a non-EU company posting direct from their country, or a non-EU company sending items to a UK based fulfilment company. In the first example, the correct VAT should be paid when the product enters the UK. In the second example, the VAT paid is only on the wholesale price of the goods entering the UK, and the difference, the extra VAT paid on the retail price, never gets paid. (If there isn't a law to stop this, it would be quite a large loophole in the VAT regulations.)

 

[paulears]

Hmm, that's quite a good one? With Amazon for my sundry business purchases, sometimes you get a VAT invoice, other time not, and I just never assume. If I get one, all the better, but sometimes it pays to be cautious with the prices. Oddly, my ebay sales say on each item - VAT invoice available on request, and in all the years I have traded, I think I have done two! My customers are usually individuals.

 

[Pish_Pash]

Hmm, that's quite a good one? With Amazon for my sundry business purchases, sometimes you get a VAT invoice, other time not, and I just never assume. If I get one, all the better, but sometimes it pays to be cautious with the prices. Oddly, my ebay sales say on each item - VAT invoice available on request, and in all the years I have traded, I think I have done two! My customers are usually individuals.

Personally, regardless of this discussion...I believe Amazon should always clearly show whether a seller is VAT registered or not...at least then customer - such as those who can who can reclaim VAT - can make an informed decision on which seller to buy from.

 

[Deleted member 59730]

Isn't Amazon registered for VAT in Luxumberg due to a deal done by that nice M. Juncker?

 

[Chris34]

Just been crunching some numbers on this and please bear with me if it’s wrong as I have no experience of importing and I am not registered for VAT. But from my understanding this is what I’ve worked out.

Chinese Seller selling to UK


Customer Pays £20 for product.


Product Cost Price = £10
Import = 20% duty = £2
Postage = £2.35
Amazon Fee at 17% of selling price = £3.40


Total Costs = £17.75

Total profit = £2.25


UK Based business


Customer pays £20


Product Cost Price = £10
Import = 20% duty = £2
Postage = £2.35
Amazon Fee at 17% of selling price = £3.40
VAT at 20% = £3.55

Total = £21.30

Then minus VAT claimed back

Import duty = £2
Postage VAT = £0.47
Amazon Fee’s VAT = £0.68

Total VAT claimed back is £3.15

£21.30 - £3.15 = £18.15

Total Profit = £1.85 Chinese seller earns just under 22% more profit like for like.


Difference in VAT = Tax collected is £3.55 from UK Seller and £3.15 from Chinese Seller. 8% difference or in other words, UK loses 8% of total tax when Chinese seller sells an item. On top of this the Chinese seller pays no earnings tax, corporation tax, NI tax, and general tax like fuel tax and business rates.

Assuming all the figures are correct, it seems like the UK is being royally screwed over. Is it any wonder that they aren’t getting the debt bill down.



Chris.

 

[Chris34]

Sorry that's totally wrong, my heads spinning with figures now. This is half the problem, it's all too overly complex.

 

[Beachbum]

"To note that, from 1 December 2012, non-established taxable persons (NETPs) will no longer be able to benefit from the UK VAT registration threshold. They will be required to register for UK VAT when they make their first supply of goods or services here regardless of the value"

Therefore there shouldn't ever be any non EU sellers on Amazon without a UK VAT number - but not many overseas sellers have...it's costing HMRC wads in lost VAT....but more importantly it's costing me in lost sales (as my Amazon overseas seller competition can undercut me by some margin)

Exactly - this rule applies to all NETPs doing business in the EU. Not just UK

As it is a relatively new law (a good one too) I don't think Amazon, eBay & HMRC have the correct policies in place to deal with this. Especially Amazon & eBay - who seem to be a law on to themselves.

UK law says it is a criminal offence for any VAT registered seller not to display their VAT number.

It is also a criminal offence for anyone that knows of a Vat fraud not to report it

So in essence any NETP, having goods dispatched by Amazon fulfilment or goods fulfilled by fulfilment warehouses in the Eu for eBay sales without a valid number Vat number is committing a criminal offence.

Therefore Amazon & eBay have details of all NETP's that are breaking the law by not provided a valid VAT number.

Surely eBay & Amazon are committing a criminal offence by not reporting these NETP's to HRMC for VAT fraud.

 

[Pish_Pash]

Sorry that's totally wrong, my heads spinning with figures now. This is half the problem, it's all too overly complex.

Chris - you're overcomplicating it.

Consider this scenario - me vs. non VAT registered overseas Amazon seller.....

I pay £5.00 for a product (I claim back the VAT charged when it arrives in the UK) ....I retail it for £12.00 on Amazon ...of which I must pay £2.00 to HMRC in VAT

The overseas seller pays the same £5.00 for the product, but he under declares the value of the product when he sends it in bulk to Amazon UK warehouses...let's say he declares the value of the product as £2.00 on the import documentation as ...he pays HMRC just 40p in VAT ...so, the only VAT he pays is when the product arrives at the UK port of entry.

So for the same product, he pays 40p to HMRC whereas I pay £2.00 to HMRC ...he can sell the product £1.60 less than me & still make the same profit. This gives him a huge advantage (especially on a product retailing for £12.00)...in short...I can't beat him on price - it's not a level playing field.

In summary I pay VAT on the retail sale price whereas for a non VAT registered overseas seller, he pays VAT on the price that the product cost him.

Beachbum, I've written to Amazon to inform them of the VAT fraud (that's what it is - third bullet point on this page.... https://www.gov.uk/report-vat-fraud) & that I expect them to suspend the sellers account. I've also reported the seller to HMRC via VAT fraud online (which is quite difficult when all you have to go on is the Amazon sellers marketplace 'name'!)

I urge anyone else faced with illegal overseas competition on Amazon to do the same...let's make some noise!

 

[Beachbum]

Chinese seller earns just under 22% more profit like for like.

Chris.

Exactly.

I don't think HMRC are aware of the scale of the problem. Looking at the problem as an optimist, HMRC are on our side here.

I'm going to post a few questions to eBay & Amazon tomorrow to find out their polices on the new NETP's VAT law and what their legal obligations are.

I also think this is the tip of the iceberg on what illegal offences Chinese sellers are committing, such as clocking themselves at UK companies, giving false addresses, giving virtual mail forwarding address, not giving vat numbers, using Chinese PayPal account to launder money out of UK without paying Vat or Tax

eBay, PayPal & Amazon policies need tightening up. It's too easy to setup a business account without putting the correct full legal company name, trading address, company number and vat number.

 

[Chris34]

Chris - you're overcomplicating it.

Consider this scenario - me vs. non VAT registered overseas Amazon seller.....

I pay £5.00 for a product (I claim back the VAT charged when it arrives in the UK) ....I retail it for £12.00 on Amazon ...of which I must pay £2.00 to HMRC in VAT

The overseas seller pays the same £5.00 for the product, but he under declares the value of the product when he sends it in bulk to Amazon UK warehouses...let's say he declares the value of the product as £2.00 on the import documentation as ...he pays HMRC just 40p in VAT ...so, the only VAT he pays is when the product arrives at the UK port of entry.

So for the same product, he pays 40p to HMRC whereas I pay £2.00 to HMRC ...he can sell the product £1.60 less than me & still make the same profit. This gives him a huge advantage (especially on a product retailing for £12.00)...in short...I can't beat him on price - it's not a level playing field.

In summary I pay VAT on the retail sale price whereas for a non VAT registered overseas seller, he pays VAT on the price that the product cost him.

Beachbum, I've written to Amazon to inform them of the VAT fraud (that's what it is - third bullet point on this page.... https://www.gov.uk/report-vat-fraud) & that I expect them to suspend the sellers account. I've also reported the seller to HMRC via VAT fraud online (which is quite difficult when all you have to go on is the Amazon sellers marketplace 'name'!)

I urge anyone else faced with illegal overseas competition on Amazon to do the same...let's make some noise!

That's the wrong way of looking at it though. You can't just accuse somebody of under declaring the value of goods without having any hard facts, HMRC would be run off their feet if they had to sort that one out for all the goods coming through the ports.

The problem as I see it is the bit in between. The lack of VAT being added (collected) on the retail price.

The VAT you would pass on to the HMRC would be £2, the VAT the chinese guy would pay VAT on would be £1.13 based on the postage costing £2.35 and the Amazon Fees being 17% with VAT included in that figure (chinese guy can't claim back VAT and can't avoid paying VAT on these bills). Obviously yourself being VAT registered would claim back the VAT from customs, postage and Amazon.

Profit wise the Chinese guy would make £2.21 and yourself £1.34

If the correct value was declared at customs then the VAT collect from the Chinese guy would be £1.74 vrs your £2


Chris.

 

[Pish_Pash]

That's the wrong way of looking at it though. You can't just accuse somebody of under declaring the value of goods without having any hard facts, .

It might be the wrong way of looking at it in your eyes...but I'm just being realistic - if these sellers are outside the reach of HMRC from a 'what the true costs of the goods are arriving at a UK port of entry' are, then there's got to be a high percentage of overseas sellers undervaluing...simply to squeeze a bit more profit out of their overseas transactions.

If I wanted to try & under declare the value of the goods....at my next VAT inspection, HMRC would only have to correlate my bank records (what I sent the supplier) vs. what the goods were declared at when they arrived at the port of entry...& then say to me "You're nicked" .....how is that going to happen with an overseas seller?

 

[Chris34]

It's the wrong way to look at it in the way that the HMRC will just turn around to you and say it's their job to police the value at customs, not yours and if you have any evidence that you think they are undervaluing the goods then provide it or shut up.

So in other words, you can complain all you like about undervaluing but nothing will get done about it as it's your word that they will be going off, no hard facts.

Charging VAT on the retail price though, you have got hard facts. If it's against the rules then tell HMRC, Amazon, every newspaper in the country and you could even report it to the EU.

What I am saying is that unless you have got evidence of them breaking the law, then I very much doubt that anything will get done about it. You could suggest better ways to police it, but I think that would fall on deaf ears.

You have to put yourself in their shoes. Somebody complaining about somebody breaking the law with no hard facts will be of less importance than somebody who presents evidence of the law being broken.



Chris.

 

[Pish_Pash]

I'm not going to complain to HMRC about them undervaluing (& I never said I would...I only mentioned undervaluing to explain the massive win of doing so if you aren't VAT registered)

The thing is once they are VAT registered (which is the actual main point here - they have to be), then the undervaluing is of no consequence...it's removed from the equation. I only spoke of indervaluation cos I'm sure most overseas sellers would (since they are out of reach of HMRC's main jurisdiction.

 

[Beachbum]

I think there are a lot of points we can discuss about illegal Chinese traders on eBay & Amazon in the UK. We all know they will use any tactic to get the competitive edge over us. However I'd like to steer this discussion on defining the laws & policies they are breaking. What laws & policies Amazon & eBay legally have enforce their sellers to do. What is HMRC view on this.

1) All Chinese sellers selling stock based in the EU need to register for VAT as NETP.

2) All business sellers need to display full legal company name, main trading address where business is carried out, company number and VAT number on Amazon & eBay - the Distance Selling Regulations – DSRs

3) Are these Chinese sellers liable of unpaid VAT retrospectively from the date of the new law: 1 December 2012.

4) Selling restrictions need to be put on sellers accounts until they provide VAT numbers.

5) Chinese sellers masking themselves as UK based companies - showing virtual address & made up company names. It is illegal to show a virtual address. Sellers need to display main trading address - the Distance Selling Regulations – DSRs

I'm going to fire off a few emails to eBay & Amazon today. And give HMRC a call

Will let you know their response

 

[GraemeL]

Trading Standards may be a better first call than HMRC. TS look after the DSR's

 

[Deleted member 59730]

What you guys don't seem to realise is that Jeff Bezos doesn't give a toss about paying UK tax. He doesn't pay a cent more tax than he can avoid, legally or illegally. His business ethos is to undercut you any way he can. He sets the rules. He thinks it is a good idea to source cheap and sell cheap.

As for ebay and paypal, any UK based company with their business model would be done for money laundering.

 

[Pish_Pash]

What you guys don't seem to realise is that Jeff Bezos doesn't give a toss about paying UK tax.

That's not what we are discussing here...I totally agree about him (or his company Amazon) giving a toss about paying tax in the UK, but this is wholly about overseas sellers using Amazon for fulfilment out of UK warehouses ('fulfilment by Amazon' as it's called - or FBA). Such overseas sellers using FBA are not registering or paying VAT on the retail price (as they are required to do so)...this gives such sellers the competitive edge over UK sellers.

 

[Chris Ashdown]

Chris - you're overcomplicating it.

Consider this scenario - me vs. non VAT registered overseas Amazon seller.....

I pay £5.00 for a product (I claim back the VAT charged when it arrives in the UK) ....I retail it for £12.00 on Amazon ...of which I must pay £2.00 to HMRC in VAT

The overseas seller pays the same £5.00 for the product, but he under declares the value of the product when he sends it in bulk to Amazon UK warehouses...let's say he declares the value of the product as £2.00 on the import documentation as ...he pays HMRC just 40p in VAT ...so, the only VAT he pays is when the product arrives at the UK port of entry.

So for the same product, he pays 40p to HMRC whereas I pay £2.00 to HMRC ...he can sell the product £1.60 less than me & still make the same profit. This gives him a huge advantage (especially on a product retailing for £12.00)...in short...I can't beat him on price - it's not a level playing field.

In summary I pay VAT on the retail sale price whereas for a non VAT registered overseas seller, he pays VAT on the price that the product cost him.

Beachbum, I've written to Amazon to inform them of the VAT fraud (that's what it is - third bullet point on this page.... https://www.gov.uk/report-vat-fraud) & that I expect them to suspend the sellers account. I've also reported the seller to HMRC via VAT fraud online (which is quite difficult when all you have to go on is the Amazon sellers marketplace 'name'!)

I urge anyone else faced with illegal overseas competition on Amazon to do the same...let's make some noise!

The overseas seller is most likely the manufacturer and he is selling at the profit value he wants, just because he is not selling to you at the same price is nothing new, many UK companies have different sales prices for different customers, there is no understating the price just they are charging you a higher price for most likely smaller sales

The vat question I don't know but worth HMRC investigating

It's often the case that the first companies establish a market and then manufacturers exploit the market for themselves, you will never get their price structure so will never be able to compete again so look elsewhere for a new start

 

[Beachbum]

is wholly about overseas sellers using Amazon for fulfilment out of UK warehouses ('fulfilment by Amazon' as it's called - or FBA). Such overseas sellers using FBA are not registering or paying VAT on the retail price (as they are required to do so)...this gives such sellers the competitive edge over UK sellers.

Yes - that's right. Short term we can also all fire off emails to Amazon & eBay about these sellers. But I don't think it will come to much. Their systems & policies will remain the same.

We need a compete game changer; Amazon & eBay must be provided valid VAT number form NETP sellers before the seller can start selling stock based in the EU. Extremely simple really.

We need to get them to change their systems so it is impossible for NETP business to sell stock within the EU without providing Amazon or eBay a valid VAT number.

We need find out what the rules and regulations are & why eBay & Amazon are allowed to provide system that is so fundamentally flawed that they are allowing sellers to commit VAT fraud on a colossal scale.

Once this has been do WE need to make sure that VAT, HMRC, DTI, Trading Standards, are all full aware of the huge flaws in the Amazon & eBay systems and get them to force Amazon & eBay to change their policies and makes sure that all sellers are compiling to EU VAT & TAX laws.

I am sure the VAT office will be very interested in this and will what to enforce eBay & Amazon to make sure this hole in the system is plugged. The amount of VAT they will be able to recover is enormous. Just the 20 sellers I've looked at on eBay already owe the VAT man £5,000,000 for unpaid VAT in the past 18 months

 

[Banyo]

There should be no threshold before registration. Having a VAT threshold defies all logic.

 

[scm5436]

I urge anyone else faced with illegal overseas competition on Amazon to do the same...let's make some noise!

Various people have mentioned complaining to amazon or hmrc, but perhaps that's the wrong way to go (as neither of them probably care). Maybe you should try the media - they love good tax avoidance stories at the moment. Or maybe panorama - again they like that sort of thing, and they'd do the investigative work for you. And complain to the FSB if you're a member, maybe they can look into it - it's not really in their interests if all the small businesses go out of business...

 

[Beachbum]

Just got off the phone from the VAT helpline.

Yes all Chinese sellers selling stock located in the UK need to register for VAT under UK Law as Non established taxable persons (NETPs). They are not allowed to start trading without a valid VAT number; it is a criminal offence to do so:

Sorry as a newbie I can't post links so search HMRC for the following VAT notices:

1) VAT Notice 700/1 Section 9 - Non-established taxable persons NETPs
2) VATREG37000 - Non-established taxable persons NETPs
3) VAT Notice 700/41 - Late registration penalty

 

[Beachbum]

Various people have mentioned complaining to amazon or hmrc, but perhaps that's the wrong way to go (as neither of them probably care). Maybe you should try the media - they love good tax avoidance stories at the moment. Or maybe panorama - again they like that sort of thing, and they'd do the investigative work for you. And complain to the FSB if you're a member, maybe they can look into it - it's not really in their interests if all the small businesses go out of business...

Yes - lots and lots of noise. We need to do it as a group and not just individuals. UK versus ROW

Government petitions, local PM's, campaigns (search 38 Degrees), media

It would be good to get someone big to grab the story and push it

 

[sglobal]

Job well done guys, especially Beachbum.
So what is the course of action we're all going to take?
I think we all need to be united on this and we should all follow the same steps so someone has to write down the exact plan and we all should execute it as a unit!
There's no doubt more and more Chinese sellers are putting us at risk and eventually wiping us out. We just can't compete with them on price for few reasons.
In my tradeline, I need to make at least a £1 on each item I sell whereas a Chinese guy would be happy to earn RMB 1 which is 10 pence. Also majority of them don't hold any physical stock and they just buy products once they've sold them. Which means they can list thousands of products which they've access to without spending a penny.

 

[Siralex]

Just got off the phone from the VAT helpline.

Yes all Chinese sellers selling stock located in the UK need to register for VAT under UK Law as Non established taxable persons (NETPs). They are not allowed to start trading without a valid VAT number; it is a criminal offence to do so:

Only Amazon it self can force NETPs to pay VAT. Will they do it, that's the question?

 

[paulears]

Only yesterday did I lose a few quid by an amazon purchase where the item doesn't have a vat receipt as the seller isn't registered. I have a relative just retired from HMRC and she always said that every report they had of evasion or dodgy dealing was looked at in terms of the sums of lost revenue, vs the cost of investigating, vs the chances of success in collecting data to use as evidence.

In this example, everything is based on declared value. If the Chinese company has a UK business they ship from, then even if it is registered for vat, unless they are actually selling the goods here, there won't be any invoices issued, and worse still, they can trade at a loss, and will be able to claim back the vat on their running costs. Unless I've lost the plot, customers send their money out of the country. The UK business just deliver, don't they?

 

[Pish_Pash]

In this example, everything is based on declared value. If the Chinese company has a UK business they ship from, then even if it is registered for vat, unless they are actually selling the goods here, there won't be any invoices issued, and worse still, they can trade at a loss, and will be able to claim back the vat on their running costs. Unless I've lost the plot, customers send their money out of the country. The UK business just deliver, don't they?

But for VAT purposes, where the sold product is dispatched from is everything. As it goes I sell stuff from the UK to Germany...I dispatch from the UK...I'd rather dispatch from Amazon.de, but the moment I send my product for fulfilment out of the Amazon warehouses in Germany...I have to pay German VAT on every associated sale (& bearing in mind I don't speak German, that's pushing the ecommerce envelope a little too far for my liking!)