eBay is forced to add 20% VAT to its fees


eBay is forced to add 20% VAT to its fees
  1. eBay is forced to add 20% VAT to its fees
    thisismoney.co.uk
    The measure, effective from August 1, follows a restructuring by eBay resulting in UK customers no longer contracting with its Luxembourg entity, eBay Europe, but with eBay (UK)…
    Personal Finance

Online marketplace eBay has started charging 20 per cent Value Added Tax on its fees to tens of thousands of businesses selling on its UK platform.

The measure, effective from August 1, follows a restructuring by eBay resulting in UK customers no longer contracting with its Luxembourg entity, eBay Europe, but with eBay (UK) Limited.

Alan Pearce, VAT partner at accountancy firm Blick Rothenberg, explained: ‘This change should not adversely affect the vast majority of VAT-registered sellers as the additional tax being charged by eBay should be recoverable via the seller’s VAT returns.

The measure follows a restructuring by eBay resulting in UK customers no longer contracting with its Luxembourg entity, eBay Europe, but with eBay (UK) Limited

‘However, non-VAT registered businesses, in other words those legitimately trading under the current £85,000 taxable turnover threshold and those registered under the flat-rate scheme will have to suffer the extra VAT.

‘Those that choose to register voluntarily will also have the benefit of being able to claim back the VAT paid on fees.’

He said of two main groups of people who will be adversely affected by the VAT change the first comprises sellers with businesses that are not VAT-registered because they are under the £85,000 threshold.

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‘Then there are sellers who are trading under the flat-rate scheme, and they are hit because they can’t recover tax and they are going to be charged VAT on eBay fees, so effectively their fees are going up by 20 per cent and they can’t claim it back.

‘And then there is the other category, which are those who should be registered but they’re not. I’ve no sympathy for those at all.’

The change by eBay follows last year’s package of measures introduced by the Chancellor, aimed at tackling the rapidly growing VAT evasion by overseas traders that sell goods in the UK via online marketplaces such as eBay, Amazon and others.

As a result, the Revenue was given the power to force online marketplaces to ensure that their overseas customers were registered and accounting for VAT or risk being liable for the VAT themselves.

The change by eBay follows last year’s package of measures introduced by the Chancellor, aimed at tackling the rapidly growing VAT evasion by overseas traders

Pearce added: ‘Forgetting the people who are not doing the right thing and trading on eBay unregistered, I think the upshot really is those businesses which are microbusinesses turning over £40,000 to £60,000 – just enough to live on as an income generation: They are going to be hit with an extra 20 per cent on the eBay fees for everything that they sell.

‘The flat rate covers businesses that trade under £150,000, so that would be quite a number of eBay sellers.

‘You determine what your flat rate is based on what you are selling, so let’s say you’re selling goods and the flat rate for that particular category is 10 per cent or 12 per cent, then you pay over to Revenue & Customs 10 per cent on your turnover, although you collect 20 per cent. 

'And the upshot of that is that you’re not paying as much VAT over, but you then can’t recover any VAT on your purchases.’

Pearce warned that the smallest businesses would have to swallow the cost or put up their prices.

He added: ‘So far, according to the Revenue, more than 7,000 new internet traders applied for VAT registration in 2016, compared with just 700 in the previous year, suggesting that the new powers are having a significant effect.

‘It is e…

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