Amazon urges Reeves to extend VAT rules and stop fake British sellers
Key Points
- Amazon backs UK consultation to extend VAT Deemed Reseller rules to all sellers
- Up to £3.2bn of UK online sales a year escape VAT via fake UK-established status
- Loophole costs the Treasury hundreds of millions annually
- 70%+ of 500 UK small businesses surveyed back the reform
- Lands as Reeves faces likely exit under incoming PM Andy Burnham
Amazon has backed a UK government consultation that would make online marketplaces collect VAT on every third-party sale, no matter where the seller claims to be based.
The company welcomed the move last week, pitching it as the fix for a loophole that lets overseas traders pose as British businesses and undercut honest UK sellers by dodging the 20% they should be charging.
The consultation lands days after Keir Starmer resigned as prime minister on 22 June, with Chancellor Rachel Reeves widely tipped to leave the Treasury once Greater Manchester mayor Andy Burnham takes over.
Amazon is, in effect, lobbying a Chancellor who may not be around to see the reform through.
The loophole
Since 2021, Deemed Reseller rules have made marketplaces collect VAT on behalf of overseas sellers while leaving UK-based sellers to handle their own.
Amazon said it has collected over £6 billion for the Exchequer under that regime. The split is the problem: it pays bad actors to look British.
Independent analysis commissioned by Amazon and cited by the ICAEW estimates up to £3.2 billion of UK online sales each year come from sellers who avoid VAT by falsely claiming to be UK-established, using shell companies, falsified documents and a cottage industry of agents built around gaming the rules.
That strips the Treasury of hundreds of millions a year and hands fraudsters an instant 20% price edge over compliant firms.
Not just Amazon
Amazon insists it is one voice in a crowd. Earlier this year 19 business groups, trade bodies and tax experts, among them the British Retail Consortium, the British Independent Retailers Association, the ICAEW and Logistics UK, wrote jointly to ministers urging faster action.
A Public First survey of 500 UK small businesses found more than 70% reckon extending the rules would cut fraud and level the field. Amazon’s own estimate puts the potential revenue uplift at around £700 million a year.
The model is not novel. Switzerland adopted comparable rules in January 2025, the US runs marketplace-facilitator rules across 46 states, and the European Commission is due to review its own marketplace VAT regime next year.
The catch
Reform is not cost-free. The current £90,000 VAT registration threshold lets the smallest UK traders and hobby sellers operate VAT-free, and a blanket regime risks dragging them in unless ministers carve out an exemption, which, as the ICAEW notes, simply opens another door for abuse.
Critics also flag the obvious self-interest: handing collection to a handful of giant platforms entrenches the giant platforms. Some sellers grumble, too, that Amazon’s own VAT handling on certain sales is hardly spotless.
Then there is the timing. The National Audit Office and Public Accounts Committee have warned a full rollout could take five to ten years, and that HMRC is already one step behind the fraud.
Amazon wants implementation “as swiftly as possible”. Whether a Burnham government, with a new Chancellor and a fresh in-tray, treats a marketplace VAT fix as a priority is the open question.
The Treasury has not set a timeline for the consultation.
