Over the past year, HMRC’s investigations into online sellers using platforms such as Amazon and eBay, decreased drastically amid concerns over tax evasion.
Tax evasion from online sellers has been a concern for HMRC as VAT evasion by overseas sellers on online platforms has cost HMRC up to £1.5billion in lost tax revenue in 2015/16 alone.
HMRC sent 80 individual data requests to platforms regarding sellers using their services between April and December 2020, which is down from 2,684 in the 2019/20 tax year. Figures show in 2016/17, 299 notices were issued. This increased to 1,556 in 2017/18, 2,317 in 2018/19 and peaked at 2,684 in 2019/20. Data shows that since 2016, HMRC’s enquiries into online sellers has been increasing however, the coronavirus pandemic has disrupted the progress.
HMRC have said that the reason behind the fall in data requests is due to reallocating resources to manage the costly coronavirus support measures, which includes the furlough scheme.
Traditional retailers paying VAT have called upon the government to address the inequalities between traditional retailers and online sellers. There are fears that online sellers, from outside the UK, have not been paying the full amount of tax owed. As VAT tax currently stands at 20%, some have said that online retailers have a 20% advantage over traditional retailers.
The head of Retailers Against VAT Abuse Schemes said that millions of parcels are coming into the UK from China and VAT is not being accounted for.
There are a number of online retailers who have signed up to provide HMRC with data regarding businesses using their platforms to sell to the UK, to assist with tackling online VAT fraud and error.