Her Majesty’s Revenue and Customs (HMRC) stands accused of overlooking widespread tax evasion by thousands of Chinese ‘burner’ companies operating through major e-commerce platforms, resulting in substantial losses to the UK Treasury.
The systematic fraud involves Chinese enterprises flooding British markets with low-cost goods while evading Value Added Tax (VAT) and import duties. These operations exploit lenient company registration and VAT regulations to establish fictitious UK front companies, which dissolve once HMRC attempts to collect outstanding taxes.
Statistical evidence reveals approximately 30,000 Chinese companies registered UK addresses in 2024 alone, with numerous cases showing no legitimate connection between registered addresses and company operations. In one striking example, a single China-based director established 87 distinct businesses across multiple UK cities, while a London student accommodation unit served as the registered address for 54 companies with 49 different Chinese accountants listed as sole directors.
The magnitude of this issue is highlighted by a Cardiff address receiving HMRC tax demands exceeding £500,000, including a recent £220,000 VAT and duty claim for a defunct Chinese VAT handling company. UK-based enterprises report increasing difficulty competing against these fraudulent operators who can offer significantly lower prices through systematic tax evasion.
Critics argue that current identification requirements for company registration and VAT certification remain inadequately stringent. Richard Allen from Retailers Against VAT Abuse Schemes emphasises that “obtaining a library card requires more identification than establishing a company and securing a VAT number in the UK.”
Companies House has announced plans to implement mandatory identity verification checks to enhance transparency and combat economic crime. However, industry experts suggest these measures may come too late, with the current system already compromised by thousands of fraudulent registrations.
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