On 20 July 2021 HMRC published research that was commissioned to gain a better understanding of the knowledge, attitudes and behaviours of Chinese online sellers in relation to their tax obligations from the sale of goods to the UK. The research was based on interviews with businesses in China that sell products in the UK through online channels.

There were high levels of awareness of changes to the UK tax system regarding VAT on online sales to the UK from 1 January 2021, but many sellers admitted that they did not have a detailed understanding of the policy. Chinese online sellers were mostly passive in their efforts to understand their UK tax and customs matters. They generally relied on intermediary agents to provide information deal with tax and customs matters on their behalf.

Brexit was often referred to by sellers. The changes to the UK tax and customs systems were commonly seen as a consequence of Brexit.

Information in Chinese

Most sellers felt it was difficult to find and understand information regarding changes to the UK tax and customs regime, mainly due to a lack of access to reliable information in Chinese. Chinese sellers often translated information they received from other sources, including HMRC guidance, and were therefore reliant on the quality of their translation and interpretations. Chinese sellers would prefer HMRC to produce and share seller information in the Chinese language.

Chinese online sellers are willing to engage with HMRC via email and HMRC could using the online seller portals of individual Online Marketplaces, or Chinese social media platforms such as WeChat.

Almost all the sellers interviewed were using a single OMP. The OMP’s own fulfilment service was responsible for all customer communications including arranging delivery and dealing with end-customer complaints.

Use of external agents

The use of external agents by the sellers interviewed was reported as standard practice by online sellers in China. Most sellers used a combination of tax agents, shipping agents and the main OMP’s fulfilment service. The tax agents assisted with tax calculations, and sellers strongly rely on the tax agent’s expertise to ensure that they are compliant with their UK tax obligations.

Sellers were also reliant on shipping agents to provide services and necessary information to help with customs. Shipping and fulfilment services were critical to business processes.

Most sellers engaged a shipping agent to take care of delivering the goods to the OMP’s warehouse which was typically located in the UK or a location in Europe. The method of delivery to the OMP’s warehouse varied and was based on business priority. Air freight was the fastest option but was expensive, whereas sea freight required more time but was cheaper. Rail freight was also used occasionally.

Once the goods arrive at the OMP’s warehouse in the UK (or Europe), the OMP’s fulfilment service takes care of delivering the goods to the end customer.

Brexit concerns

There were concerns that Brexit may make it more complicated to ship goods to the UK via Europe due to additional customs checks. Chinese online sellers who also delivered goods to Europe were considering using split shipments (shipping goods to the UK in addition to a location in Europe) instead of a single location within the EU.

Sellers were open to engagement with HMRC about future compliance.