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BIFA warns UK forwarders of e-commerce compliance risks, VAT fraud

THE British International Freight Association (BIFA), representing 1,500 forwarders, warns that customs is placing an "ever-increasing emphasis on compliance" and urges members to stay street legal.

"One area that is causing considerable concern is VAT fraud and the forthcoming Union Customs Code (UCC), which is being introduced across the European Union (EU) on May 1," a BIFA statement said.

It notes that in its latest annual report on the VAT Gap based on 2013 figures, the European Commission showed that the difference between VAT due and collected amounted to EUR168 billion (US$190.72 billion). "In real terms this amounts to a VAT shortfall due to fraud and evasion, tax avoidance, bankruptcies and simple miscalculation," it said.

According to BIFA director general, Robert Keen, in part the problem is that the trade has moved on significantly, while regulators have reacted slowly to these changes.

"In particular, what we will refer to as Internet Trading and the Onward Supply Relief regime seem to particularly lend themselves to fraud. Some overseas websites openly proclaim that they value all goods at a certain price to circumvent the 'De Minimis threshold".

Prior to Christmas 2015, UK Customs raided warehouses believed to contain goods supplied by overseas online traders that were being sold in the UK without VAT being paid or accounted for. Goods worth many hundreds of thousands of pounds sterling were seized during the raids.

"Anecdotally, some BIFA members have become very suspicious of goods being imported under the Onward Supply Relief regime and concerned about their liability relative to VAT. "Others are becoming very sceptical about Internet-based trade, particularly where the declarant is based overseas," the newsletter reported.

"Some members have reported that the pattern of trade and vehicles supplied to move goods for exports from the UK to other EU members states does not make sense to them."

Part of the problem is that it is "very difficult to identify who the buyer and seller are. Where the goods are received on a (Delivery Duty Paid) DDP basis and local taxes are invoiced outside the EU, there is no guarantee that the VAT will be added to the value of the goods".

BIFA recommends forwarders on their customers carry out the following checks: carry out due diligence checks on new customers including obtaining, where appropriate, VAT and Deferment numbers.

"Always challenge the use of multiple economic operator registration and identifications (EORI) by single entities; and incorporate BIFA Standard Trading Conditions into any contract," the newsletter advised.

Mr Keen concludes: "It is clear that a minority of businesses are established to make money through fraud and other illegal activities. Asking relevant questions will likely result in those engaged in fraud to look to less diligent partners with whom to conduct business."