Shein and Temu tax-free parcels rule under review

Major retailers have welcomed the government's review of a rule that allows small parcels to enter the UK duty-free, saying it gives overseas firms such as Shein and Temu an unfair advantage over British businesses.

The current rule allows international retailers to send packages to the UK worth less than £135 without incurring import taxes.

Former Dragon's Den star Theo Paphitis, whose retail group includes the Ryman and Robert Dyas, told the BBC the measure was ruining UK High Streets.

Some retailers have argued they are being undercut by overseas rival, but a body representing small businesses said scrapping the exemption could raise costs for them and price rises for customers.

Chancellor Rachel Reeves announced on Wednesday that the government planned to review the customs treatment of low-value products entering the UK following complaints from retailers.

The explosion of parcels being shipped under the measure has prompted increased scrutiny in recent years. While all retailers use the exemption, those who sell fast-fashion and cheap goods have seen their sales soar.

It has fuelled the rise of Chinese retailers, such as online giants Shein and Temu, which ship low-value packages to the UK and other countries to reach millions of customers.

Speaking to the BBC's Today programme, Mr Paphitis said retailers had been lobbying government "for a very, very long time", arguing the rule had had devastating impact "on our retail landscape and our high streets".

He joined the bosses of Sainsbury's, Currys and the British Retail Consortium in welcoming the government's consultation on the rule.

UK businesses bringing in larger shipments have to pay taxes, and they also argue that cheaper goods might fail to meet the same environmental and ethical standards that they keep to.

Aside from concerns over unfair competition with domestic retailers, it has also been raised that governments could be missing out on potential tax income.

The so called "de mimimis" rule has received renewed interest after US president Donald Trump scrapped a similar measure in America amid his escalating trade war with China.

Goods worth less than $800 into the US will soon be subject to charges, where they were previously exempt. The move has already prompted Chinese retailers to raise their prices.

In the UK, there are further concerns that China will dump goods here to avoid the tariffs which Trump has imposed on Chinese goods.

Earlier this month, the boss of Currys told the Financial Times that the "single biggest area where lots of stock is likely to land in the UK... is from the likes of Shein, Temu, Alibaba, TikTok shop and, most of all, Amazon marketplace".

On Thursday, Alex Baldock told the BBC he was pleased the government was "reviewing the low-value shipment loophole, and that they're committed to levelling the playing field between British and overseas retailers".

But the Federation of Small Businesses urged the government to proceed with caution in its de minimis consultation, suggesting that scrapping it might "ultimately lead to higher prices for consumers".

"With 16% of goods moved by small firms sitting below the £135 threshold, a decision to scrap it impacts on trading and inflation," said Tina McKenzie, chair of the FSB.

"It's right to be concerned about potential future dumping of goods, as escalating tariffs applied by bigger global blocs against each other may mean a surge in goods arriving in markets like our own," she added.

Mr Paphitis told the BBC it was "absolute nonsense" that the measure kept inflation and prices down, arguing it led to a loss of jobs and tax revenue for the UK, due to businesses being unable to compete with cheaper foreign rivals.

Helen Dickinson, the chief executive of the British Retail Consortium, the trade body for retailers, said the review was "more critical now" due to a "rise in the number of potentially non-compliant products entering the UK market".

The British Independent Retailers Association said small packages having no tax or charges was a key concern. It called on ministers to act to "deter import surges" in order to "protect independent retailers".

When Sainsbury's announced their latest financial results earlier this month, boss Simon Roberts called on the government to act as soon as possible.

"Everyone should pay their tax... so if there's a loophole here which means that's not happening then that needs to be closed so it's a level playing field for everybody," he said.