Chinese eBay sellers with UK based stock

[paulears]

Isn't that only the case when it is the same company - as in the Amazon example. If we use TNT as an example, then would this then make them liable, as they dispatch from their warehouses, or even UK distributers? When you actually buy from many of the Chinese suppliers, they use a different company out there to dispatch goods direct to me. I buy from ABC, but the customs documents detail a company I have never even heard of - presumably freight forwarders. The UK arm would probably not be the people you bought from, which is different from Amazon.

 

[Pish_Pash]

I think you're clouding the issue....when an overseas seller uses a UK fulfilment service (eg Amazon), the products are sent to the Uk from overseas & stored in the UK fulfilment providers warehouse until a customer buys...this is no longer 'distance' selling (on account the goods are already here in the UK)...therefore the overseas seller needs a VAT number from day 1 of trading in such a way. He wouldn't need a VAT number if the goods were dispatched from his own country (eg China) ...because the UK customer would then be charged VAT in such an instance.

 

[Beachbum]

I've just submitted a trust & safety report to eBay detailing a few sellers that are:

Non-established taxable persons, listing & supplying goods located in the UK on eBay who are either not:

a) Registered for VAT to comply under notice HMRC's Notice 700/1
b) Displaying a VAT registration number to comply with the Electronic Commerce (EC Directive) Regulations 2002

Lets see what they do - doubt they will do anything. The sellers in questions are producing taxable sale of over £1000,000 per month and all based in China. That's a lot of unpaid VAT going to China...

Just so happens I've just been introduced to someone who works in the VAT Fraud investigations team. I've just sent him a report on what's happening both on eBay & Amazon. I will get you know what he has to says about it....[

 

[Beachbum]

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!)

This is the reason why the UK is the target for Chinese Sellers - they all speak English.

You will find this sort of VAT scam isn't taking place on eBay or Amazon in non English speaking EU countries....

Take a look at the top sellers on eBay.de - there is not a Chinese seller in sight. The ebay.de sellers are selling the same products at twice the price because they are not being undercut but Chinese sellers

 

[Parcelhub Ltd]

Technically they aren't 'trading illegally' though as all they are doing is outsourcing their fulfilment in the UK.

 

[Beachbum]

they are "trading illegally" if any of their stock is located in the UK for fulfilment by anyone and they are not VAT Registered.

HMRC's Notice 700/1 - Sections 9.1 & 9.3 & 2.3

Perhaps you need to clarify your position with the VAT helpline 0300 200 3700

 

[JamieM]

What I don't understand is how they are getting the goods through customs without a VAT number or an EORI number. Any thoughts on this?

 

[Chris34]

What I don't understand is how they are getting the goods through customs without a VAT number or an EORI number. Any thoughts on this?

They don't do that. They have a VAT number and pay duty at customs but they don't charge VAT on the sale. That's what the issue is.

 

[Pish_Pash]

Take a look at the top sellers on eBay.de - there is not a Chinese seller in sight. The ebay.de sellers are selling the same products at twice the price because they are not being undercut but Chinese sellers

Well, now my competitior has a foothold on Amazon UK (via fulfilment from Amazon UK warehouses), he's unsurisingly gone & enabled all his products for fulfilment to Amazon.de from Amazon.co.uk ...on the back of my translated adverts!

Seriously the whole premise of territorial distribution agreements breaks down very quickly ij the light of such unrestrained practise ...it may as well be Manufacturer->Amazon-> Consumer (& we may as well all pack up shop & go & live on that street where everyone is on benefits!)

They have a VAT number and pay duty at customs but they don't charge VAT on the sale. That's what the issue is.

Actually, the issue is that my 'fulfilled by Amazon' in the UK competitor has no VAT number, so Jamie's puzzlement equals mine. Perhaps they get the goods into the country via a third party's VAT number (does anyone really check that the VAT ties up exactly with the seller?) Then perhaps the third party goes bust, does a runner etc....that'd be quite a paper trail mess to clean up...by which time, sellers have cleaned up sales wise?

 

[Beachbum]

What I don't understand is how they are getting the goods through customs without a VAT number or an EORI number. Any thoughts on this?

I've been wondering the same thing. Perhaps Parcelhub Ltd can shed some light on this.

A freight forwarding company in china needs to declare who they are sending the goods to. Provide customs with the company that has purchased the goods including an invoice, company name, address, vat number and EORI number who will then get the customs invoice and a little green slip from the Vat man with details of all imports at the end of the month.

In this case a dodge custom invoice is made out to the fulfillment warehouse under declaring the true value and ownership of the goods. The fulfillment warehouse will dutifully pays all the duty and vat, plus claims back the vat. Customs thinks the fulfillment warehouse is the orginal purchasers of the goods, even through they haven't paid a bean from them or perhaps they have paid just one bean from them.

Then the Chinese companies sells the products on eBay & Amazon, takes the money out of the uk Vat free. The Uk fulfilment declare sales but not the true value or who purchased them. The stock disappears off the books. Or the fulfillment center invoice a grossly undervalued sum of the stock back along with fulliment & warehousing cost to the original Chinese eBay seller who is selling the products on amazon and ebay .

Customs & Excise has no record of the Chinese seller the Chinese freight forwarding company is the sender & invoicer. The UK fulfillment centre is the receiver and invoice payer.

Or something like that....

 

[14Steve14]

Just an idea that may be a pile of crock.

What about starting a government petition. With China and the UK supposedly in talks about trade links would this type of thing be of interest to the government. Through linking to the petition it could get thousands of signatures quickly especially as many of the bigger business people on here may have other links with people on say linkedin who would also sign.

Just an idea.

 

[Beachbum]

What about starting a government petition.

Just an idea.

Yes - I was thinking the same. We need to take action.

At the moment we are just a lot of small voices.

If we get together a put a proper coordinated campaign and all work together we could eventually see some real action.

Take a look at 38degrees dot org dot UK - sorry I can post website links

 

[Raw Rob]

Take a look at 38degrees dot org dot UK - sorry I can post website links

Maybe the official government epetition site is more appropriate for this issue: http://epetitions.direct.gov.uk

 

[GraemeL]

I have been watching this thread, feeling all along that there is going to be a lot of wasted time and energy in an attempt to deal with this.

While Amazon exists in its current form, nothing will change. It is Amazon that's the problem, not Sellers. I could argue that any seller who is not VAT registered is unfair competition.

Amazon don't pay UK taxes either.

What is needed is an alternative to Amazon. Fulfillment is not a requisite, just a trusted Marketing platform for VAT registered sellers.

G

 

[paulears]

This seems to be a bit of a mess. In my mind, there would seem to be loads of holes that could be used.

Just thinking out loud, but what stops Company 1 in china misdescribing the value of stock they send to Company 2 in the UK, who pay the duty/VAT. They then send the goods out to a supplied name in the UK as a service, charged to the overseas company. I guess this would mean they are buying products and then giving them away to the 3rd party. If the overseas company pay them enough to remain solvent, have they actually done anything wrong. Making a profit not being compulsory. Interesting?

 

[Deleted member 59730]

Although not directly related I was party to a discussion with the OFT years ago. Their only consideration is if the consumer/public get the lowest price. Amazon provides the lowest price possible by many means including dodging their own taxes, claiming millions from the government to pay tax credits to underpaid workers and more. Why would the government care when the only thing they think about is getting re-elected?

Amazon helps the government keep inflation down with their low prices.

 

[japancool]

I don't use fulfilment by Amazon, but it seems fairly simple to me.

The Chinese company sends the goods to Amazon, declaring the wholesale price of the goods. They pay VAT on the wholesale price. Amazon probably pay the customs duty and invoice the Chinese company for it, the same way that freight companies do, so no EORI number is required - it falls under Amazon;s EORI number. The goods have legally entered the UK, and customs duty has been paid for it.

The customer is invoiced by the company in China, which, being based outside the UK, doe not have to charge VAT. The situation is the same as a non-VAT registered UK company. Their costs are lower because they're selling direct.

It's the same situation as a non-VAT registered UK company. No laws are being broken and no duty is being avoided - although there probably is underdeclaration of value going on.

 

[apricot]

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.

I don't think Product Cost Price for Chinese is £10. It is generally 1/3 of the production price.. If the item they sell is £10, it is generally £3 to produce the item.

 

[Pish_Pash]

Although not directly related I was party to a discussion with the OFT years ago. Their only consideration is if the consumer/public get the lowest price. Amazon provides the lowest price possible by many means including dodging their own taxes, claiming millions from the government to pay tax credits to underpaid workers and more. Why would the government care when the only thing they think about is getting re-elected?

Amazon helps the government keep inflation down with their low prices.

You don't think HMRC being able to trouser billions in lost VAT would pique their interest? (as well as being perceived to be beating Amazon up a little in the media?).

Besides I had thought the global enemy nowadays was deflation (it's what causes Mario Draghi to toss & turn in his ECB patterned duvet each night) ....this initiative would certainly help attack that!

 

[JamieM]

I don't use fulfilment by Amazon, but it seems fairly simple to me.

The Chinese company sends the goods to Amazon, declaring the wholesale price of the goods. They pay VAT on the wholesale price. Amazon probably pay the customs duty and invoice the Chinese company for it, the same way that freight companies do, so no EORI number is required - it falls under Amazon;s EORI number. The goods have legally entered the UK, and customs duty has been paid for it.

The customer is invoiced by the company in China, which, being based outside the UK, doe not have to charge VAT. The situation is the same as a non-VAT registered UK company. Their costs are lower because they're selling direct.

It's the same situation as a non-VAT registered UK company. No laws are being broken and no duty is being avoided - although there probably is underdeclaration of value going on.

It definitely doesn't work like that with Amazon.

----------------------

1. We will not serve as the importer of record or ultimate consignee on any of your imported freight.
2. We will not be responsible for any duties, taxes or other charges associated with the importation of your freight.
3. We will not provide tax references to you.
4. We will not provide brokerage or freight forwarding services.
5. You are responsible for compliance and filing with all other applicable governmental agencies at the time of importation.
6. You must provide prepaid delivery to Amazon's fulfilment centre.

Source: http://www.amazon.co.uk/gp/help/customer/display.html?ie=UTF8&nodeId=200299050

----------------------

I have been watching this thread, feeling all along that there is going to be a lot of wasted time and energy in an attempt to deal with this.

While Amazon exists in its current form, nothing will change. It is Amazon that's the problem, not Sellers. I could argue that any seller who is not VAT registered is unfair competition.

Amazon don't pay UK taxes either.

What is needed is an alternative to Amazon. Fulfillment is not a requisite, just a trusted Marketing platform for VAT registered sellers.

G

Whilst I agree that it would likely be a waste of time to try and fight this and Amazon should have a role to play in ensuring VAT compliance, ultimately it is the responsibility of HMRC. There would seem to be some hole in the system or fraud being carried out by UK companies.

I do wonder what would happen if HMRC tightened this up though. Would it deter Chinese sellers or would they just comply with the VAT regulations as they'd still be in a strong position to undercut UK based sellers. Perhaps it wouldn't really be worth their while and they would return to supplying in bulk to importers rather than direct to consumer.

 

[Chris34]

It seems pretty simple to me. There may be lot's of little loops that the Chinese are jumping through and there may be lots of 'little white lies' going on, the problem is that investigating all the 'little white lies' would take so long that it wouldn't make a difference in the grand scheme of things. However if everybody focused their attention on one particular piece of law that is being broken then you can bring that piece of information to the attention of the masses and then just add the message 'this is probably just the tip of the iceberg as to what's really going on'. Light blue touch paper sit back and watch what happens.

If it just meant reporting all the traders from abroad selling in the UK without providing a VAT receipt then just that alone we would be talking about £Billions in lost revenue. Remember it's not just the VAT they are losing, all the honest British businesses that employ people are paying taxes, those taxes are being lost aswell as the jobs are being lost to China. The actual business owners are making less profit, meaning less taxes on the profit. The knock on effect of just this one breach of the VAT rules is costing the country £Billions.

The main goal should be to get everybody singing from the same hymn sheet. If everybody starts going off in all different directions then it's going to end up in one big complicated mess and the wider masses will not understand what is going on, meaning that it will be more likely nothing will come of it.


Chris.

 

[Pish_Pash]

Personally, the one change I'd like to see, is to have the Govt 'enforce' Amazon (& Ebay) &/or other 'fulfilment' providers to ensure that all overseas sellers selling goods to UK customers from within the UK are displaying an easy to find, legitimate VAT number ....else suspend the seller's account. (have Amazon, Ebay & fulfilment provider do such checks a but like the money laundering checks that banks must carry out - serious consequences if they don't)

This alone would generate a huge amount of VAT (on account all overseas sellers would then scramble to get VAT registered)....and would certainly level the playing field a bit (because such dodgy sellers would not have a 'free run' at undercutting legitimate businesses). Sure, they're still be a lot of dodgy goings on, but it's a start.

As an aside (& not strictly related to this topic), I'd also like Amazon & the likes to be made to show clearly whether *any* seller (whether an overseas seller or based in the UK) is VAT registered or not. At the moment it's a lottery...&buyers give up trying to find out....& I'm probably losing out on a a lot of business from other VAT registered business (whom - if it were easy for them to see whether a seller is VAT registered or not - would clearly put their custom with VAT registered sellers so they can claim the VAT back)

 

[paulears]

I'd certainly appreciate it on ebay, where every saving counts

 

[wayzgoose]

Could you not just add your VAT registration number to each product description?

 

[Pish_Pash]

That wouldn't solve the issue ...sure anyone looking at my listings would then know I'm VAT registered (except on Amazon you can't do this as everyone shares the same listing), but the issue here is unless it's totally clear that other sellers *aren't* VAT registered, then some customers are just too lazy (or bemused) to find out & so just go on ahead & place their order with the lowest priced seller (who probably aren't VAT registered)

What I'm saying if it was obvious / easy to see whether an online seller is VAT registered OR NOT (on Ebay & Amazon - by making Ebay & Amazon show this information clearly available e.g. "Business seller - VAT registered"), then more business would go to VAT registered sellers (well at least for those customers who are VAT registered themselves).

As it goes if you spend a bit of time & dig deep, you can often see "I provide VAT receipts with all my orders" info on Ebay (but not on Amazon) ....but would a buyer be aware that unless he see that phrase, that the seller isn't VAT registered - it's not exactly intuitive.

 

[Beachbum]

Just spent the last 2 days looking at a couple of different eBay categories and their sellers. So far I've logged £250,000,000 of sales from stock in the UK from non EU based companies not charging VAT.

Not sure if I have the time to get the list up to £1 billion - but I'm thinking this is way beyond what anyone thinks.

I asked one seller if I could get a VAT invoice if I bought the item - he said no he wasn't VAT registered. They are doing £400,000 a month on eBay from stock based the UK.

Its time to take action and get eBay & Amazon to answer a few questions; Parliament Select Committee seems to be a good place to start.

I think Parliament would be more than interested in why eBay & Amazon are providing a platform for a Billion pound VAT fraud!!

I'm writing a report this weekend for my MP - he seems very interested in what's happening.

I think eBay & Amazon need to be forced by Parliament to take account and amend how they operate, forcing all sellers to stay on the right side of the law.

It's not just us small business retailers on Amazon & eBay that are being effected, its every major High St retailer - I am sure they would back it too.

This is so big it can't be ignored any more.

 

[Karimbo]

When I was 18, selling on ebay was my shortcut to independance and freedom.While everyone else from my uni was wrking in fast food places. I bought stuff from alibabi and sold it on ebay to pay my way through uni.

WHat ebay and the lax customs is doing now is destroying small businesses two-fold. CHinese sellers just delcare items as gifts for cn22 and customs does not bat an eyelid. So where as you or I would have to pay customs to importat goods into the UK and also charge VAT in order to reclaim import VAT. The chinese sekkers sell direct to consumer without paying a penny.

WIth operations which sell from a UK warehouse managed by a chinese factory. They are also evading VAT, AS British residents we will get rigistered for VAT when we meet the threshold and that adds to our prices. These Chinese UK based warehouses just dont give a damn.At the end of the day it's not their government they are answering to, it's a "foreign" government that they can walk all over and keep on doing it as long as they can get away with it.

FOr instance, I buy stuff for my business from ebay - i'll see a seller with 30K+ positive feedbacks in a 12 month period. WHo are selling goods from £5 to £50 of value. So doing the math they must be hitting 10X the vat registration threshold. So then I'll email them after the purchase and ask for the vat receipt and they respond with "theyre in the process of registering"> WHich is hogwash - they have no intention of registering, theyre just using that line to avoid people contacting ebay/hmrc about them.

incidently there is no easy way to report a seller for using an invalid VAT id. Or even complain about a company that should be vat registered when they aren't. HMRC can easily get ebay to comply, just ask ebay to automatically require sellers to provide proof of VAT registration after they've exceeded the sales threshold.

 

[Pish_Pash]

incidently there is no easy way to report a seller for using an invalid VAT id. Or even complain about a company that should be vat registered when they aren't. HMRC can easily get ebay to comply, just ask ebay to automatically require sellers to provide proof of VAT registration after they've exceeded the sales threshold.

All valid points, but your last paragraph misses the bullseye for this particular thread - there is NO VAT sales threshold for overseas sellers fulfilling out of the UK....the all need to be VAT registered. End of.

 

[Karimbo]

All valid points, but your last paragraph misses the bullseye for this particular thread - there is NO VAT sales threshold for overseas sellers fulfilling out of the UK....the all need to be VAT registered. End of.

there is in a roundabout way.

They need to declare correct custom values so the customer pays import VAT on receipt. There is a £15 vat free limit which is probably because collecting vat on items valued at £15 is going to cost more in admin than they can gain in value. However customs are poorly enforced and overseas sellers are abusing the system by declaring items as gifts.

 

[dooyoo]

But at the end of the day no one stops us little guys from going to Hong Kong or other offshore, register company, open bank account and do the same thing.
It is not that hard nor expensive to do and this is what people do, instead of wasting time and effort on forums and epetitions, if all of us would do it, maybe government would start to look why there is no VAT coming in.
Do not get me wrong, I hate that there is no manufacturing in UK and all small shops are full with Chinese made unsafe goods. But there have to be a super big change going on.
And I do not know what exactly and I am afraid no one know what have to be done............I guess things are how they are for a reason.
.

 

[globby]

I don't think it's that easy dooyoo - after all we're based in the UK and it is much easier to prosecute us for non VAT compliance/fraud than someone based in China and lets not forget that if HMRC are too lazy/incompetent to stamp down on something like this - what makes you think they will bother with someone based abroad.

The issue in discussion is Chinese/foreign based companies using UK fulfilment and delivering to customers within the UK. Chinese based sellers selling out of China are a different issue and VAT ("sample" based fraud") is a whole different cup of tea and less easy to police than this issue which would seem to require ALL foreign based sellers selling out of the UK to have VAT registration..

I've had a chat with a few friends in the media industry about this. The only way something will be done is if there is coverage and HMRC/Ebay/Amazon are embarrassed into making a change - and a change in this case seems to be a simple requirement to get eBay/Amazon to require a VAT number - of course I do not know whether government can force this upon them - that is a realm of politics/law I do not have any understanding over.

Beachbum how far have you come with your investigation? I have a few contacts in media (broadsheets) and I am prepared to try my best to use them for this purpose on this issue. Naturally they will require research of reasonable standard before they will begin to even consider looking at the issue

 

[ecoleman]

Would watchdog be interested in something like this?

It's a huge problem in the UK and something does need to be done about it.

 

[Karimbo]

Would watchdog be interested in something like this?

It's a huge problem in the UK and something does need to be done about it.

Watchdog is a consumer programme. They'd only be interested in stuff where consumers are being ripped off by price or poor quality items. Their core market isn't UK business owners so not relevant.

 

[japancool]

Abolish VAT, that sounds like the simplest solution.

 

[dooyoo]

well, I have noticed that most of these items that Chinese sellers are selling more or less are electronics or have some component of electronic parts. And I bet non of them would comply with CE and safety regulation, therefore they can be reported to trading standards. I guess that could be easiest start.

 

[Beachbum]

Things are coming on well here. Bit mind numbing. Been researching 4 different categories on eBay and the top sellers. It seems that Chinese sellers with UK in the stock are taking over.

Here is what the breakdown is so far
98 Sellers - annual turnover: £137,695,632

Breaks down like this:

44 Chinese sellers with stock in UK & no VAT = £37,085,988
5 USA sellers with stock in UK & no VAT = £14,140,668
19 UK seller No VAT, PO Boxes Address, No Business Name = £42,578,136
23 UK with VAT Numbers = £33,683,988
7 Non UK with VAT Numbers = £10,206,852

So out of the £137,695,632.00

£33,683,988 or 24% is going to legitimate UK companies
£93,804,792 or 68% is fraud
Only 1 Chinese seller has registered for VAT in the UK

Vatman is missing out on £15,634,132 VAT

Just trying to put it all together in a easy to read report that I can send of to everyone

Should be finished soon I hope.

 

[JamieM]

Where are you getting the numbers from?

 

[Chris34]

Where are you getting the numbers from?

Probably Terapeak. If you are on Ebay it has become a necessity to have it to stand a chance of understanding what's going on and still have time to get yer dinner / sleep. Put simply, you can check out any sellers history based on sales amount £, sales volume, best selling items, average price, listing format, total listings, sell through rates and loads of other stuff, it also puts it all in neat little charts.

It used to be something that you used to find neat little hot selling products that were currently in demand, however with the Cassini search update last year, it affected things so drastically that you have to look at the competition with the highest sales and try and emulate what they are doing right to stand any chance of success.

Chris.

 

[Beachbum]

Probably Terapeak.

 

[Beachbum]

If anyone has some examples of non VAT registered Chinese Sellers on Amazon.co.uk that are being fulfilled by Amazon - can you private message me the links