VAT fraud concerns put marginal VAT scheme under scrutiny in UK and EU

How the marginal VAT scheme works

Under EU and UK rules, the marginal VAT scheme allows dealers who buy goods from private individuals or other non-VAT-registered sources to pay VAT only on the profit margin when reselling them. This prevents double VAT, aligning with the principle of taxing only once. However, many devices imported from outside the UK or EU are being declared as qualifying for marginal VAT without proof they were previously taxed: a practice that some call systemic fraud.

Calls to ban marginal VAT for electronics

Some market participants are calling for the outright removal of the marginal VAT scheme for electronics. They argue this would instantly shut down a major fraud channel, create a level playing field for compliant businesses, and increase VAT revenues for governments. Critics admit that prices for used Apple iPhones and other devices would rise but say this is a necessary step to restore market fairness.

UK debate on scrapping VAT for refurbished goods

In parallel, a coalition of 25 UK businesses, charities, and community groups, including Currys, Back Market, Suez UK, and the Restart Project, is urging the government to remove VAT entirely from repair and refurbished electronics. Their aim is to make sustainable technology more affordable, boost reuse, and create green jobs.

Two very different solutions

Removing VAT could stimulate demand, while banning marginal VAT could curb fraud and protect tax revenues. Both approaches would require major tax policy changes and are unlikely to be implemented quickly. The debate highlights a growing tension between making reused electronics cheaper and ensuring the integrity of the tax system.