The coalition argues that gaps in the current framework are being exploited by some overseas sellers operating through online marketplaces to avoid paying VAT, Bira said in a press release.
The British Independent Retailers Association, backed by 18 organisations, has urged the Government to consult on extending VAT online marketplace liability rules.
The group warns that overseas sellers are exploiting loopholes to avoid VAT, undercutting compliant UK retailers and costing the Exchequer around £700 million (~$945 million) annually.
By misrepresenting themselves as UK-established businesses, these sellers are allegedly undercutting compliant domestic retailers, placing them at a structural disadvantage. Independent analysis cited in the letter suggests the loophole could be costing the Exchequer around £700 million (~$945 million) per year.
Under existing rules, online marketplaces are required to collect and remit VAT only on certain transactions involving non-UK established sellers. The coalition contends that this limited liability creates structural vulnerabilities that determined fraudsters can exploit, despite efforts by platforms to tackle abuse.
In the letter, Bira and its co-signatories urge the Government to consider extending VAT online marketplace liability rules so that platforms are responsible for ensuring VAT compliance more broadly. They argue that such a move would help level the playing field for UK businesses and strengthen trust in an increasingly omnichannel retail environment.
“Even the smallest advantage can determine whether a business survives or fails,” the letter stated, highlighting that many small firms rely on online marketplaces to reach new customers amid historically high operating costs.
The group also points to findings from the Public Accounts Committee and the National Audit Office, which have warned that VAT fraud linked to online marketplaces is rising and that existing rules have not kept pace with increasingly sophisticated methods used to avoid UK VAT.
While acknowledging concerns that reform could affect small sellers, particularly those below the VAT registration threshold, the coalition says any changes should be designed to protect micro and unregistered businesses from additional administrative burdens.
Bira chief executive Andrew Goodacre said the Government should move swiftly to consult on potential reforms, both to protect compliant UK retailers and to safeguard public finances.
The coalition has indicated it stands ready to engage with ministers and officials to help shape proposals that address fraud without harming legitimate small businesses.
Fibre2Fashion News Desk (SG)
