A major tax loophole exploited by online retail giants Shein and Temu is facing fierce backlash from MPs and British retail leaders, who are demanding the Chancellor take immediate action in the upcoming Autumn Statement.
The controversy centres on the 'de minimis' rule, a customs threshold that allows goods valued under £135 to be imported into the UK without paying the standard 20% VAT. While designed for small, occasional purchases, fast fashion behemoths are allegedly shipping millions of individual packages to bypass the tax, saving them a fortune while undercutting UK high street businesses that must charge VAT.
An Unfair Playing Field
This practice has created what many are calling an unlevel playing field. "This is a loophole that is being abused," stated one retail insider. British retailers are legally obligated to apply the 20% VAT on all sales, placing them at a significant price disadvantage compared to their overseas competitors who can avoid the tax on low-value items.
The Treasury is reportedly considering slashing the threshold to as low as £20, a move that would force these companies to pay their fair share and could generate an estimated £500 million in additional revenue for public finances.
Mounting Pressure on the Chancellor
With the Autumn Statement looming, pressure is mounting on Jeremy Hunt to act. A cross-party group of MPs has labelled the current system "untenable," arguing it harms British business and costs the Treasury vital funds. The British Retail Consortium has been a vocal critic, consistently highlighting the competitive distortion the loophole creates.
The government finds itself in a difficult position, balancing the desire to support UK plc with the complex realities of international trade regulations. However, with the financial burden on consumers and businesses remaining high, closing this loophole is increasingly seen as a straightforward way to promote fairness and boost Treasury coffers.
All eyes will now be on the Chancellor next week to see if he heeds these calls and finally levels the retail playing field.
