Clothing giant Shein avoided an estimated £150 million of import tax on UK sales last year

How has Shein legally avoided paying an estimated £150 million of import tax on UK sales last year? ITV Business and Economics Editor Joel Hills explains

The online fashion retailer Shein made a record profit last year on the back of soaring sales.

The company’s financial success is built on its huge popularity with “Gen Z” shoppers - referring to anyone who was born between 1997 and 2012. But the company also enjoys a very significant tax advantage, worth an estimated £150 million in the UK in 2023.

Shein connects those who want to buy clothes with those who make them. Individual orders are shipped directly from factories, mostly in China, to consumers in the UK. This arrangement means Shein avoids the requirement to hold stock in warehouses here, and also means the company legally avoids paying import duties.

Import duty - a tax - applies to all goods over £135.

Industry experts say the vast majority of orders with Shein are below this threshold and those which exceed it are sometimes broken into multiple, smaller orders to avoid paying the tax.

Shein’s total UK sales rose to £1.51 billion in 2023, according to GlobalData.

As a result, Dan Neidle’s Tax Policy Associates (TPA) think tank calculates Shein avoided paying £150 million in import duties. There are a number of different import duty rates - the average rate for clothing is 12%, whilst 8% applies for trainers.

Shein’s sales are predominantly of clothing but, for the sake of prudence, the TPA applied a rate of 10% across Shein’s UK sales in its calculation.

Dan Neidle of the Tax Policy Associates told ITV News: “It’s sensible to have import duty exemptions to protect small businesses and consumers from customs charges and bureaucracy.

"But it’s not right that these exemptions enable billion pound businesses to escape import duties and gain a competitive advantage over other retailers.”

He added: “This has become a dangerous loophole, and the government should close it."

From more or less a standing start in 2020, Shein has overtaken BooHoo, H&M and John Lewis to become the UK’s 11th most popular clothing and footwear retailer.

GlobalData forecasts Shein will have risen to sixth place by 2027, overtaking Zara, Asda and TK Max albeit still behind the top three of Next, Primark and Marks and Spencer.

The company, which was founded in China but has since moved its headquarters to Singapore, is now exploring the possibility of listing on the London Stock Exchange.

In a statement, a spokesperson for Shein said: "SHEIN’s success comes from our ability to produce our customers' fashion choices. We keep prices affordable through our on-demand business model and flexible supply chain.

"This reduces wastage of materials and lowers our unsold inventory. We pass these savings on to our customers, and this has driven our success around the world."

Meanwhile, a spokesperson for the Treasury said: “Our customs and tax regime balances reducing burdens for businesses and consumers buying lower-value goods from overseas with the interests of UK businesses.

"Goods worth up to £135 can be imported from overseas without incurring customs duty, but VAT is charged at the same rate as it would be for domestic goods.”

Want a quick and expert briefing on the biggest news stories? Listen to our latest podcasts to find out What You Need To Know...