HMRC accused of ignoring online VAT fraud worth £1.2bn a year

HM Revenue & Customs has been accused of being soft on billions of pounds of VAT fraud committed by rogue traders using online marketplaces such as Amazon and eBay.

The accusation comes after a senior HMRC official said last week that his department had never seized goods from traders suspected of being part of a £1.2bn-a-year VAT fraud via Amazon’s marketplace and other online sites.

The scam involves foreign companies warehousing products in the UK and selling them without charging VAT via internet marketplaces.

Legitimate traders claim the scam hands the fraudsters an unfair advantage.

Richard Allen, founder of Retailers Against VAT Abuse Schemes (RAVAS), said: “HMRC was handed a dossier containing the names and details of hundreds of fraudsters three years ago.

“Yet in that entire period, despite serious and criminal fraud taking place by traders using Amazon warehouses, HMRC has not made a single prosecution or seized goods when it has identified rogue operators.

“When measured against the actions of other jurisdictions such as Germany - who have taken enforcement action - or even simple common sense, HMRC’s behaviour can be seen as nothing other than going lenient on Amazon rogue traders”.

The chancellor took measures last year to tighten up 2016 legislation designed to force the likes of Amazon and eBay to police their own site for VAT fraudsters. Websites are now jointly liable for ensuring companies selling goods to UK consumers via their websites are paying the correct VAT.

But last week, during a public accounts committee hearing, chair Meg Hillier MP, said to HMRC’s deputy chief executive Jim Harra: “According to Amazon ... they said ‘to our knowledge HMRC has never issued a notice to Amazon to seize the third-party goods belonging to a seller in respect of whom they have issued a joint and several liability notice’.”

Harra told the committee that : “We don’t think that as our powers currently stand it’s a practical way of us making any meaningful difference here, but it’s definitely an area we want to look at to see if we can use it”.

HMRC said that “fully refutes” RAVAS’s claim it has been soft on the fraud and said that it had had 27,550 applications to register for VAT from overseas online retail businesses since its measures on joint liability were introduced in 2016 and 2018.

HMRC added: “The UK has led the way in holding online marketplaces jointly liable for VAT evaded overseas and in the UK by being the first country to bring in new powers to hold them to account”.

Amazon and eBay have both previously told the committee that they take VAT fraud seriously.