Temu’s rapid expansion in Britain, driven by a favourable customs exemption, has raised questions over its tax contributions and the impact on domestic retailers, as regulators prepare to tighten rules on low-value imports.
Temu’s rapid expansion in Britain is now drawing as much attention for its tax treatment as for its sales growth. The Financial Times reported that the Chinese marketplace’s UK revenue more than doubled last year to $171 million, up 171% from the previous year, as it continued to rely on a direct-to-consumer model that ships low-cost goods from lower-price markets to British shoppers. Temu’s wider parent, PDD Holdings, has also shown how sharply the business has scaled, with revenue almost doubling in 2023 as marketing spend and consumer demand surged.
That growth has unfolded against a customs regime that has made Britain an attractive landing point for small parcels. The UK currently exempts imports valued below £135 from customs duty, a threshold that has helped online sellers compete on price. According to the Financial Times, that relief has been heavily used by Temu and rivals such as Shein, which have built large customer bases through aggressive online advertising and direct shipment. The Treasury has said the exemption will be removed from October 2028, while the European Union has already begun tightening its own low-value import rules with a temporary charge on online purchases and a broader overhaul due later in the decade.
The same reporting also highlights the unusual contrast between Temu’s sales and its footprint in Britain. In 2024, the company recorded $63 million of revenue and $3 million of profit without any UK employees, according to the Financial Times, while last year it reported $6 million of profit and 31 staff. Temu’s UK unit said its main role was to provide business support to other group companies and said it had paid £985,000 in corporation tax. That profile has sharpened criticism from policymakers and retailers who argue that the benefits of the business are flowing out of the country while the tax base is limited.
The broader corporate picture helps explain why Temu has remained so aggressive. Retail and company filings show that PDD Holdings’ 2023 revenue rose to about ¥247 billion, or £27 billion, from ¥130 billion, or £14.2 billion, the year before, while operating profit climbed 93% to ¥58 billion. That performance underpinned the group’s ability to keep spending on customer acquisition and market expansion, even as scrutiny grew over the costs imposed on domestic retailers and the use of low-value import rules.
The regulatory pressure is not confined to Britain. The United States ended duty-free treatment for low-value parcels from China and Hong Kong in May 2024 and later widened the change globally, a shift that has already tested the scale-up model used by cross-border platforms. France has moved in a different direction, with Reuters reporting that the Senate backed amendments targeting online fast-fashion sellers such as Temu and Shein. The common thread is a growing political willingness in major markets to close the gap between digital retail growth and customs enforcement.
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