HMRC have recently released the results of research that they have conducted into Chinese cross-border selling into the UK. The research came in the form of detailed interviews with Chinese ecommerce cross-border sellers, and has been titled ‘Knowledge and Attitudes of Online Sellers in China to UK Tax Compliance’. The research was quite illuminating, with results showing that Chinese ecommerce sellers operating in the UK tend to rely on online marketplaces and third-party agents to decipher the communications provided by HMRC. Here are the main talking points from the research and our take on the findings.
How Aware Are Chinese Sellers Of The UK Tax System?
The awareness of UK tax system is slightly contradictory when it comes to Chinese sellers. On the one hand, the research showed that the sellers did have a broad and undefined knowledge of their tax obligations, but they are not very knowledgeable when it comes to their specific responsibilities. For the more specific tax rules, they are more than happy for their online marketplaces and tax agents to direct them.
On the other hand, when it comes to changes of their tax obligations the sellers seem to be very well informed. This would suggest that their online marketplaces, which they are using as their primary source of information, are doing a good job of keeping Chinese sellers up to date. The sellers seemed especially knowledgeable on Brexit, which it seems was a big news story in China.
What Are The Typical Business Practices Of Chinese Ecommerce Sellers?
The first thing that was apparent when assessing the business practices was the reliance they have on online marketplaces. As you may have guessed from the last section it is clear that Chinese cross-border sellers rely on online marketplaces for their tax-related information, but this is not where the reliance ends. The findings showed that the sellers also rely on their online marketplaces for fulfilment, sales, and regulation updates.
In addition, the sellers tend to use a Chinese third-party tax agent to calculate and pay all their VAT. This means that the typical business model for Chinese cross-border sellers is quite streamlined, as they only have to deal with one account on their online marketplace and one tax agent, to whom they are willing to trust with almost all of their tax obligations.
The probable cause for the decision to use Chinese tax agents is the overwhelming preference to correspond in Chinese. Almost all the participants said they wanted Chinese correspondence. Furthermore, another interesting point was that the participants seemed to greatly prefer to use WeChat as their primary form of communication in favour of emails. Chinese sellers seem to use the app as a way of receiving and disseminating information and communicating with tax agents.
How Is The Relationship Between The Chinese Sellers And HMRC?
For the most part, the sellers interviewed seemed to believe that communication and themselves was acceptable and they liked to be communicated with directly. They also claimed they would be happy to proactively research the changes that HMRC informed them of. They did, however, claim that they did often find the information to be confusing – especially when it was not in Chinese.
Another complaint they had was that the information was commonly distributed via email. As stated in the earlier section, the Chinese sellers tend to prefer WeChat and are aware that they are liable to miss HMRC emails. This undoubtedly contributes to their preference of receiving information from their online marketplace or tax agent.
Conclusion
Whilst the report was mainly positive, it is clear to see the difficulties that Chinese sellers face when it comes to selling in the UK and dealing with HMRC. Fortunately, J&P can help. We are one of the leading suppliers of accounting services for Chinese sellers, due to the fact that we have offices both in the UK and China.
If you are a business who participates in cross border e-commerce, or importing of any kind, we would be more than happy to help you register for an EU and UK EORI number. We can also help you register for UK VAT, the UK VAT deferral scheme, file your UK and EU VAT returns, and help you comply with VAT in case your account faces any issues.
At J&P, helping your business is our passion, and we understand that companies across the UK are at risk now more than ever. We are here to support you through this post-Brexit period, so please do not hesitate to give us a call on 0161 637 1080 or send an e-mail to enquiries@jpaccountant.com.
