New Business Secretary expresses concerns over Shein's tax loophole

The new Business Secretary, Johnathan Reynolds, has expressed concerns about a tax "loophole" being used by Shein, which sees the retailer ship small packages to the UK - rather than having a domestic fulfilment centre - to avoid paying tax on small orders.

If the Chinese fast-fashion retailer committed to a listing on the London Stock Exchange, it would be expected to meet "ethical and moral targets [on] all business aspects", Jonathan Reynolds told Times Radio.

Reynolds expressed that he would want to discuss this with the retail giant if it was considering further business in the UK, especially with a potential IPO listing on the London Stock Exchange.

"When any company is active in the UK, our aspiration should be that we regulate that company from the UK," he said.

The UK is turning up the pressures on overseas retailers, such as Shein and Temu, who ship directly to Western countries from China in small parcels rather than creating fulfilment centres on UK soil. This means that they do not have to pay import duties as packages worth less than £135 avoid tax. This is known as the "de minimis" rule. Shipments greater than £135 can incur customs duties of up to 25%.

The news comes after the retailer had been in talks with both the US and UK over share listing plans, but has faced significant regulatory hurdles to secure a listing in New York. Last year, US legislators called for the firm to be investigated over allegations that Uighur forced labour was used in the production of some of its clothes.

Shein, the fast-fashion e-tailer that sells dresses for as little as £5, is now expected to list on the London Stock Exchange.

The new business secretary is not the only one concerned with Shein's business practices. The British Fashion Council has also expressed concerns. It said that the retailer's potential listing was a "significant concern" to the industry and that "questions remain" about its business practices.

Caroline Rush, Chief Executive of the British Fashion Council, said the organisation had written to the government, urging it to do its "due diligence to ensure that Shein is operating at the same standards that we would call for our UK retailers to operate at".

TheIndustry.fashion has contacted Shein for comment.