Marketplace VAT crackdown risks creating new loopholes, indie retailers warn

The British Independent Retailers Association (Bira), which works with over 6,000 independent retailers across the UK, has responded to reports in The Times that Chancellor John Healey will use the Budget to make platforms such as Amazon, eBay and Temu responsible for collecting VAT owed by sellers, with the proceeds expected to fund business rates cuts for high street shops.

Bira welcomes the move to tackle VAT fraud by online sellers but is concerned that by closing one loophole, the Treasury risks creating two new ones. Under the reported plans, marketplaces would only collect VAT for sellers with an annual turnover above £90,000, and second-hand products could be exempt. Bira warns that these carve-outs will be exploited by sellers looking to evade VAT, leaving the revenue raised well below the expected £1bn.

“The headline is positive, but the devil is in the detail, and we will not see VAT evasion stopped if the carve-outs for the VAT threshold and second-hand products remain in place," said Andrew Goodacre, CEO of Bira. "All sales should incur VAT, full stop. These changes would provide much needed income to reduce business rates and go some way to levelling the competition between online and physical shops. Both of these benefits are at risk because of these exemptions.”

Mr Goodacre added: “The Government has an opportunity to deliver meaningful reform that tackles VAT fraud, levels the playing field and raises much needed revenue for the Exchequer to support small retailers on the high street. But retaining broad exemptions for smaller sellers and second-hand goods risks creating new fraud loopholes that undermine these objectives. We urge Ministers to resist pressure to water down the proposals and ensure the reforms deliver a fairer system for businesses that already play by the rules.”