UK Tightens Tax Enforcement: Plans to End Low-Value Parcel Tax Relief Early; Trump Issues 100% Tariff Threat
- TBA
- Jun 29
- 6 min read
UK pulls forward plan to close small parcel import tax loophole
According to UK media reports, the British government will bring forward the abolition of tariff relief for imported parcels valued at less than £135 in an effort to address growing competitive pressure from overseas e-commerce platforms. Last year, the UK Chancellor indicated that Britain would follow similar approaches adopted by the United States and Europe and reform the system by 2029. However, the Treasury announced last week that the exemption will now be abolished earlier, in October 2028.
However, several major UK retailers argue that the revised timeline is still too slow and will do little to alleviate the challenges facing domestic retailers.
Under the current rules, overseas retailers can ship parcels worth less than £135 directly to UK consumers without paying customs duties. These goods are commonly referred to as de minimis imports.
It remains unclear how much additional tax revenue the new policy will generate. However, a previous investigation by Sky News found that the declared trade value of de minimis imports reached £5.9 billion during the 2024–2025 fiscal year. Based on an illustrative tariff rate of 20%, the potential tax revenue could exceed £1 billion.
George Weston, Chief Executive of Associated British Foods (ABF), the parent company of fashion retailer Primark, said the government has already acknowledged that the current system harms UK high streets and deprives the Treasury of hundreds of millions of pounds in potential tax revenue, yet the policy will remain in place for another two years.
The British Retail Consortium (BRC), which represents many of the UK's largest retailers, also stated that the newly announced reforms "still fall far short" of what is needed. Its members include major retailers such as Next, Sainsbury's, and Superdrug.
Industry observers believe that as cross-border e-commerce continues to grow, debates in the UK over import tax fairness, the protection of brick-and-mortar retailers, and competition within the e-commerce sector are likely to continue.
VAT and PAYE payments will have to be made by direct debit
HM Revenue & Customs (HMRC) has launched a major tax consultation that could require most businesses and sole traders to pay Value Added Tax (VAT) and Pay As You Earn (PAYE) liabilities through Direct Debit, eliminating alternative payment methods such as bank transfers, debit or credit cards, and even cheques.
According to HMRC, the proposed reform could affect approximately 2.4 million businesses, self-employed individuals, and employers, representing around 87% of all current VAT and PAYE taxpayers. Only some large businesses with exceptionally high tax liabilities may continue to use other electronic payment methods.
Currently, only around 330,000 of the UK's 2.73 million VAT- and PAYE-registered taxpayers pay via Direct Debit, accounting for just 13% of the total. As a result, the proposal would represent one of the most significant changes to the UK tax payment system in recent years.
Under the proposed system:
Businesses would set up a one-time Direct Debit authorization through their online VAT account.
HMRC would automatically collect the payment three days after the tax payment deadline.
Taxpayers would receive advance notice of the payment amount and collection date three working days before the funds are withdrawn.
HMRC believes the change would create a more automated “file-and-pay” process, removing the need for businesses to arrange individual payments each time a tax return is submitted. From a business perspective, automatic collection may also reduce the risk of late payment penalties.
However, the system would not apply to every business. The UK BACS Direct Debit system has a transaction limit of approximately £20 million per payment, meaning large companies with tax liabilities exceeding that amount would be unable to use Direct Debit. HMRC intends to retain alternative electronic payment methods for those businesses.
In addition, companies with annual VAT liabilities exceeding £2.3 million but below £20 million would also see their Payments on Account included within the new arrangements.
In recent years, HMRC has actively encouraged businesses to adopt Direct Debit payments. Earlier this year, official guidance described Direct Debit as the department's “primary payment method.” However, uptake has remained relatively low.
At present, most businesses continue to pay taxes using:
Bank transfers
Debit cards
Corporate credit cards
Standing orders
Cheques
Cash payments at bank counters
The proposed reform forms part of HMRC’s broader tax digitalization strategy. In addition to expanding Direct Debit payments, HMRC plans to phase out several paper-based VAT forms by the end of 2026 and replace them with online processes, including:
Option to Tax notifications
Requests to revoke an Option to Tax
VAT deregistration applications
Other VAT compliance procedures
The public consultation on mandatory Direct Debit payments for VAT and PAYE will remain open until 16 August 2026. If the proposal receives sufficient support, the government could formally announce implementation plans in the Autumn Budget later this year.
Trump threatens 100% tariff on any country that imposes digital services tax
U.S. President Donald Trump has warned that any country imposing a Digital Services Tax (DST) on American technology companies could face punitive tariffs of up to 100% on exports to the United States. The move could further escalate trade tensions between the United States and Europe and add uncertainty to the future of global digital tax reforms.
In a recent post on his social media platform Truth Social, Trump stated that any country implementing a digital services tax targeting U.S. companies would be subject to an immediate 100% tariff on goods exported to the United States.
“This tariff will supersede any trade agreements made with that country, whether implemented, signed, or pending implementation,” Trump wrote.
Digital services taxes generally target the world’s largest and most profitable technology companies, including Meta Platforms, Alphabet, and Amazon. Because these firms are predominantly American, Trump has long opposed such taxes, arguing that they unfairly discriminate against U.S. technology companies.
Last year, Trump threatened to suspend trade negotiations with Canada over its proposed digital services tax. The Canadian government subsequently withdrew the measure before it was due to take effect.
More than a dozen countries have already introduced or proposed similar digital taxes. France was among the first to adopt such a measure.
Since 2019, France has imposed a 3% digital services tax on revenue earned in France by large digital companies with annual French revenue exceeding €25 million and global revenue exceeding €750 million. French lawmakers even proposed increasing the tax rate to 6% last year.
Trump previously warned that the United States could impose 100% tariffs on French wine if France refused to eliminate its digital tax. French President Emmanuel Macron responded that France would not abandon its tax policy under U.S. pressure. France’s digital services tax applies to activities such as online advertising, digital marketplaces, and online platforms.
The Office of the U.S. Trade Representative has also repeatedly threatened retaliatory tariffs against countries including France, the United Kingdom, Spain, and Austria, arguing that their digital tax regimes unfairly target American businesses.
Trump’s latest comments come at a time of renewed trade tensions between the United States and Europe.
Under a previous trade agreement between the United States and the European Union, U.S. tariffs on European goods were capped at 15%, while the EU agreed to gradually reduce tariffs on American industrial products to zero. However, slow progress within the EU’s legislative process prompted Trump to threaten the reimposition of 25% tariffs on European imports, including automobiles, and to demand that the EU implement the agreed changes by July 4.
Analysts believe that if Trump follows through on his threat to impose 100% tariffs, trade tensions between the United States and Europe could intensify significantly. However, considerable legal uncertainty remains regarding whether Trump has the authority to implement such tariffs immediately.
Why TB Accountants?
Professional Assurance: Our team includes ACA members and ACCA-certified professionals, delivering services to the highest industry standards.
Responsive Service: We respond to your inquiries within 24 hours, ensuring efficient communication across time zones.
Multilingual Support: Services available in English, Mandarin, Cantonese, Japanese, French, German, Spanish, Italian, Turkish, and more.
Trusted by Clients Worldwide: Consistently praised by global clients for proactive, professional, and reliable accounting and tax support.
For individuals and businesses looking for UK taxation services, use our contact form to get in touch for more information.
Get in touch with us at info@tbagroup.uk or for a free one-to-one consultation.
