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Brit iPad sellers feel the pain of VAT-free imports

Blighty sellers face collapse unless tax laws are tightened

A number of iPad sellers based outside the UK are selling cut-price fondleslabs in Blighty after seemingly bypassing UK VAT payments, a Register analysis can reveal.

Under UK tax law, sellers have to declare 20 per cent VAT. But El Reg has discovered a number of sellers do not have listed VAT numbers and are selling iPads at a rate which would amount to a loss-leader if they were declaring VAT.*

Those sellers who do not pay the tax could force their smaller British rivals out of business, say the latter.

For example, one seller selling several thousand Apple iPad minis on eBay listed the price as £170, compared with the Apple recommended retail price of £199 for the same model, including VAT.

Another seller, also based outside the UK and with no listed VAT number, was flogging thousands of the same product for £168.

According to the HM Revenue & Customs website, businesses with "no UK place of business selling to UK customers ... would normally need to register for VAT under UK VAT rules ... and be treated as a Non-established Taxable Person".

El Reg understands that the discount from Apple for sellers of their fondleslabs is between 4-8 per cent.

This means it is not feasible for businesses to sell so many iPads at such "bargain" prices without taking a hefty hit.

It follows an investigation by The Mirror, which found a number of online British retailers of iPad cases are being undercut by Chinese firms that don't pay VAT.

One British retailer, wishing not to be named, told The Mirror: “We are three months behind paying rent on our warehouse and on the brink of bankruptcy. The Chinese selling in the UK without paying VAT have wiped out UK best sellers. We cannot get near their price.”

An industry insider, who also asked not to be named, told El Reg: "The feeling in the industry is that this is a big scam, much bigger than people are aware. HMRC could be losing millions." ®

UK VAT rules

Currently in the UK, if you are a "distance" seller, you must register for VAT if your turnover for the previous 12 months is above £81,000, known as the VAT registration threshold.

‪Companies situated outside the EU can also register in any member country for VAT purposes, although an associated number is still needed for business transactions. ‬

It should also be noted that tax avoidance (perfectly legal, as it uses the existing tax system to reduce payments), and tax evasion (escaping payment by illegal means) are quite distinct. We have no way of knowing into which category the sellers fall.

Bootnote

*We have decided against naming the sellers for legal reasons, while we await their response.

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