The UK Government’s Financial Watchdog the National Audit Office has investigated concerns that online sellers outside the EU are avoiding charging VAT. Online sales accounted for 14.5 percent of all UK retail sales in 2016. Just over half of these were “non-store” sales, mainly through online marketplaces, where buyers and sellers can “meet” and transact.

VAT rules require that all traders based outside the EU selling goods online to customers in the UK should charge VAT if their goods are already in the UK at the point of sale. In these cases, sellers should pay import VAT and customs duties when the goods are imported, based on their value, and charge their customers VAT on the final sale price. The sellers should also be registered with HMRC, and are required to submit regular VAT returns. The sellers must account to HMRC for the VAT charged to customers, reclaiming any eligible import VAT through their VAT return.

The key findings of the investigation are contained in the report.