Online giants Amazon and eBay could be forced to foot the bill for VAT fraud associated with small overseas sellers who use the two websites.
Tax officials are investigating whether etailers Amazon and eBay can be made to cough up after VAT fraud soared.
It comes after an investigation from The Guardian found that hundreds of high-value gifts including Apple watches, iPads and Fitbits were being sold on Amazon’s UK website without charging shoppers for VAT.
Record numbers of small overseas sellers shipped goods to the UK this year ahead of the Christmas rush and arranged to sell them through Amazon, with the etail titan dispatching products from its warehouses in Britain.
But it is claimed that HM Revenue and Customs know little about the businesses selling VAT-free items, many of which give virtual office or residential addresses in the US, China and Hong Kong.
EBay has already pledged to report a number of sellers using its marketplace to HMRC after it was revealed that Chinese traders were providing invalid VAT numbers or cloning numbers providing to other firms.
During a debate in the House of Lords earlier this week, Conservative peer Lord Lucas claimed that “for some long while Amazon and eBay have been collaborating with hundreds of overseas retailers to defraud the taxman of millions of pounds every day”.
Both websites deny that allegation and insist responsibility for charging the correct rate of VAT lies with the sellers.
Lord Lucas added that HMRC had been “very slow in its response” and urged it to act swiftly in order to protect “honest internet retailers”.
Treasury spokesman Lord Ashton said HMRC was “looking at all possible options”, which included investigating “whether online platforms should be made liable for VAT”.
Amazon and eBay told The Guardian they help sellers understand tax obligations, but insisted they cannot be held liable in cases of evasion.
All businesses that supply goods from locations in the UK are required to register with HMRC for VAT if they have annual UK sales exceeding £82,000.