Foreign Sellers Target the UK: Tax loopholes widen, unfair competition intensifies”

By Samet Oynamış – USA Contributor

The Hidden Tax Loopholes Fueling a Global E-Commerce Exploit

The current state of global e-commerce is not only reshaping consumer habits but also quietly undermining national tax systems. A growing and troubling trend in the UK market has caught my attention: foreign entrepreneurs purchasing goods in bulk from the United States and selling them via UK-based fulfillment centers—often while circumventing tax obligations.

At first glance, this may appear to be just another chapter in the book of globalization. However, behind the scenes lies a loophole-ridden strategy that exposes significant tax gaps and structural inequities.

From the U.S. to the UK: Arbitrage or Exploitation?

Here’s how the process typically works:

Sellers buy goods at competitive prices in the U.S.
These are shipped to UK fulfillment centers.
Products are listed for sale on platforms like Amazon UK, eBay, or Etsy.
A company is rapidly formed in the UK, but before it reaches the VAT registration threshold, it is dissolved.
A new company is then set up, repeating the process.

This cycle allows sellers to operate without paying VAT, severely undercutting local competitors and eroding public revenue. It’s estimated that more than 1,000 such entities are currently active in the UK. So far, HMRC (His Majesty’s Revenue and Customs) has done little to address this growing issue.

Why Is This So Easy to Do?

One major enabler of this model is the ease of forming companies in business-friendly jurisdictions:

United States: Entrepreneurs can form LLCs online in states like Delaware or Wyoming in just a few days, often for less than $300. Many of these states allow for anonymity, further shielding the true owners.
Estonia: Through its e-Residency program, Estonia offers fully digital business registration accessible worldwide.
Hong Kong: Also boasts simplified company formation for international traders.

While these systems foster entrepreneurship, they also open the door for abuse—especially when cross-border oversight is weak or nonexistent.

Who Am I, and Why Am I Speaking Out?

I’m Samet Oynamış, one of the founding partners of Social Enterprises LLC, a U.S.-based accounting and business consultancy firm. I’m also an Enrolled Agent authorized by the Internal Revenue Service (IRS).

Over the past decade, I’ve advised thousands of entrepreneurs on U.S. tax law, international business formation, and regulatory compliance. My work has given me firsthand insight into how these structures are often engineered not just for efficiency—but for systematic tax avoidance.

As I see it:

“Foreign entrepreneurs engaging in UK commerce is a healthy sign of globalization. But when that engagement exploits VAT loopholes, it morphs into a systemic threat—harming national revenues and honest local businesses alike. If HMRC doesn’t act soon, this model will only continue to grow.”

What Can Be Done?

To restore fairness to the UK marketplace and curb tax abuse, I propose the following measures:

✅ Implement digital tracking for newly formed companies
✅ Reevaluate and enforce the VAT exemption threshold
✅ Monitor patterns of serial company formations linked to the same individuals or groups
✅ Mandate greater seller transparency and reporting from platforms like Amazon, eBay, and Etsy

In Conclusion…

The expansion of global e-commerce holds immense promise. But when open markets are used to engineer closed-door tax advantages, everyone loses—especially ethical businesses and the taxpayers who play by the rules.

For a developed economy like the UK, protecting fair competition is not only about fiscal justice—it’s about ensuring long-term market health and integrity.

Samet Oynamış
Contributor from the USA | Enrolled Agent, IRS | Founding Partner, Social Enterprises LLC