Amazon, eBay and other online marketplaces are profiting from third party sellers who fail to charge VAT in the UK. A report by MPs estimates that up to £1.5 billion has been lost as a result. MPs in the Public Accounts Committee claimed HMRC was "too cautious" in pursuing the "fraudsters". Amazon and eBay said they were working with HMRC on the issue.
It has emerged that foreign firms selling goods to UK shoppers are keeping some of their stock in UK warehouses to provide next day delivery. If items are dispatched from UK soil, the sellers have to charge VAT at 20%. But many have not been, so undercutting genuine UK suppliers and reducing tax revenue, the committee's report found.
According to the report, it is, "bewildering that these big companies have taken such little action to date". It adds that the likes of Amazon and eBay, "continue to profit from fraudulent activities taking place on their sites" by charging the sellers a commission.”
HMRC responded to criticism by pointing out the introduction of new rules last year to hold online marketplaces liable for unpaid VAT by overseas sellers. This has sparked a ten-fold rise in the number of sellers registering for VAT. "The new reforms will secure an extra £875 million in tax to help pay for vital public services," an HMRC spokesman told the BBC.