Shein hit with lawsuit over tax loophole

Shein has been accused of committing customs and VAT fraud when delivering parcels from China to UK customers.

The online fashion giant has been hit with a High Court lawsuit over claims of “manipulating customs declarations for VAT evasion”, The Telegraph reported.

Customs agent IT Way Transgroup Clearance, which lodged the claim alongside Orange Transgroup, says it acted as an agent for Shein between 2021 and 2024.

The firm claimed that it worked with the retailer “under pressure and reputational risk”, and argued that Shein had “misrepresented parcel responsibility”. It is seeking damages worth £5.8m from the retailer.

While a spokesman for Shein declined to comment on the “ongoing litigation”, the retailer has always argued that it is “fully compliant with all tax policies and pays applicable taxes including corporation tax, VAT and employment taxes”.

This is not the first time that the Chinese fashion retailer has faced criticism over its use of a tax loophole in the UK that allows it to import products worth less than £135 without paying import duties.

Retail bosses from the likes of Currys, Primark, Monsoon and Next have regularly complained that the brand’s use of the de minimis rule puts them at a competitive disadvantage and called for it to be closed.

Chancellor Rachel Reeves pledged to review the loophole in April following the US and EU’s decision to scrap similar tax breaks in their respective regions.

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