VAT tax evasion on Amazon and Ebay is threatening to “run out of control” as HM Revenue & Customs has all but abandoned inquiries into online sellers during the pandemic.
Third-party sellers on platforms like Amazon and Ebay are understood to have cost the UK between £1 billion and £1.5 billion between 2015 and 2016 by not paying VAT, the Financial Times reported.
Despite this HMRC has dramatically reduced efforts to tackle tax evasion over the past year, sending just 80 individual data requests between April and December 2020.
According to a freedom of information request made by accountancy firm UHY Hacker Young, this figure plummeted from 2684 requests made in the 2019-2020 tax year.
This is the lowest figure recorded since HMRC was given powers to investigate individual sellers in autumn 2016.
“Online marketplaces need to be a level playing field for all sellers and right now, HMRC is allowing sellers overseas to have an unfair advantage,” UHY Hacker Young’s partner Sean Glancy said.
HMRC said that the low number of data requests was due to a major reallocation of its resources in the wake of the pandemic, piling all its efforts into coronavirus support measures and furlough schemes.
While Glancy said this was “vitally important” work, it “can’t come at the cost of allowing tax evasion to run out of control”.
This danger has been compounded by Brexit after new rules came into place in January meaning all overseas sellers to the UK must register for VAT in the UK when selling items over £135.
HMRC said it “regularly asks for data from third parties which is used to identify areas where we need to educate customers on their obligations.
“We also use the data to identify non-compliance and support customers to get their tax affairs up to date.”