Online sales attract VAT in the same way as goods bought in person. In 2016, 14.5% of all UK retail sales were online, up from 2% in 2006. Just over 50% of these sales were through online marketplaces rather than direct by the seller. Amazon and eBay are two of the best known online marketplaces but there are many others. The VAT rules require that all traders based outside the European Union (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. But some are not doing so. HM Revenue & Customs (HMRC) is responsible for collecting and enforcing payment of VAT. It has estimated that online VAT fraud and error cost between £1 billion and £1.5 billion in lost tax revenue in 2015–16. This estimate is subject to a high level of uncertainty and HMRC does not have estimates of the amounts lost before 2015–16. The Committee of Public Accounts has raised concerns before; in 2013 and more recently in April 2016, when it reported on tax fraud more widely, highlighting how slow HMRC had been to respond to the growing risk of VAT fraud by online sellers.
17 October 2017