Amazon welcomes Government VAT Reform Consultation

Amazon say that the current VAT rules contain a structural gap and have been calling for VAT Reform. The current rules treat UK-established and overseas sellers differently, and bad actors are exploiting this difference.

Since the regime was introduced, Amazon have seen increasingly sophisticated forms of abuse emerge from overseas sellers misrepresenting themselves as British businesses, including the use of shell companies, falsified documents, and a cottage industry of service providers built around circumventing VAT collection.

The reason this can be exploited is that since 2021, Amazon (indeed all marketplaces) have been required to collect VAT on behalf of overseas sellers trading on UK platforms under the existing Deemed Reseller regime. To date, Amazon have collected over £6 billion in VAT revenue for the UK Government.

Amazon invest heavily in compliance, including hundreds of employees working closely with HMRC using advanced data analytics and verification tools, because they believe public revenues must be protected from fraud and legitimate sellers should not be undercut by those breaking the rules. Independent economic analysis estimates that up to £3.

2 billion of sales across online retail in the UK each year are made by sellers who avoid VAT collection by falsely claiming to be UK-established. This costs the Treasury hundreds of millions every year in lost revenue. Amazon welcome the Government’s decision to consult on extending Deemed Reseller rules to all sellers, regardless of where they are based.

Closing this loophole, they say, will raise significant revenue for the Exchequer and simplify compliance for both HMRC and legitimate sellers. Amazon are not alone in calling for VAT reform, they are one voice in a broad coalition calling for reform.

Earlier this year, 19 business groups, trade bodies, and tax experts, including the British Retail Consortium, the British Independent Retailers Association, the Institute of Chartered Accountants in England and Wales, and Logistics UK, wrote jointly to the Government calling for accelerated implementation.

There are of course problems with treating all marketplace sellers the same under any VAT reform that may be adopted. Those on special schemes such as the Flat Rate Scheme and Margin Scheme don’t calculate VAT as a straight percentage in the way that those on the Full Rate scheme do.

And of course there are some UK sellers who’s turnover means they don’t have to register and collect VAT at all. Of course exceptions could be made for these sellers (or the ability to reclaim VAT collected on their behalf), but this just opens the door to more possible abuse from overseas sellers.

We urge the Government to move from consultation to implementation as swiftly as possible. Amazon will engage constructively, submit formal evidence, and continue investing in the technology and enforcement needed to protect customers, compliant sellers, and public revenues.

We look forward to working with, HM Treasury, HMRC and the wider industry to deliver reform that is effective, practical and fair, and that represents the interests of our sellers. – Amazon