Creating a level playing field: Amazon welcomes the UK Government's consultation on VAT reform

Key takeaways

Amazon welcomes the UK Government's consultation on extending VAT Deemed Reseller rules to all sellers, regardless of where they are based — closing a loophole that costs the Treasury hundreds of millions each year.
To date, Amazon has collected over £6 billion in VAT revenue for the UK Government, but increasingly sophisticated fraud by bad actors is undermining honest UK businesses.
Amazon, alongside a broad coalition of business groups, trade bodies, and tax experts, is calling for reform, with an independent survey finding more than 70% of UK small businesses believe extending the rules would reduce VAT fraud and level the playing field.

Small businesses are the backbone of the UK economy. We are proud to support tens of thousands of UK small and medium-sized enterprises sell on Amazon’s store in the UK, and last year they achieved more than £4 billion in export sales. We continue to provide them with the tools, technology, and reach they need to grow, and we believe they deserve to compete on a level playing field.

What are the current rules?

Since 2021, Amazon has been required to collect VAT on behalf of overseas sellers trading on our UK store under the existing Deemed Reseller regime. To date, we have collected over £6 billion in VAT revenue for the UK Government.

We invest heavily in compliance, including hundreds of employees working closely with HMRC using advanced data analytics and verification tools, because we believe public revenues must be protected from fraud and legitimate sellers should not be undercut by those breaking the rules.

What's the gap?

However, the current rules contain a structural gap. They treat UK-established and overseas sellers differently, and bad actors are exploiting this difference. Since the regime was introduced, we 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.

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.

This is not a niche compliance problem. It is a structural unfairness at the heart of UK online retail. Honest British businesses, including small firms, are competing against bad actors who are exploiting gaps in the law to gain an advantage.

What would reform look like?

We welcome the Government's decision to consult on extending Deemed Reseller rules to all sellers, regardless of where they are based. Closing this loophole will raise significant revenue for the Exchequer and simplify compliance for both HMRC and legitimate sellers.

This challenge is not unique to the UK; similar frameworks already operate in Switzerland. Several EU Member States are pursuing similar reforms, and the European Commission is due to review its marketplace VAT collection rules next year, driven by the same need to close gaps exploited through misdeclared establishment status.

Worker sealing cardboard box with packing tape in warehouse

Who's calling for change?

Amazon is 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.

An independent survey of 500 UK small businesses carried out by Public First found that more than 70% believe extending these rules would reduce VAT fraud and level the playing field. Our selling partners tell us that unfair competition suspected to be linked to VAT non-compliance is a serious concern to them.

What happens next?

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.

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