Was VAT on eBay fees correctly charged?
There’s been some discussion in eBay circles on whether marketplaces such as eBay and Amazon correctly charged VAT on fees to businesses in the past.
The argument goes “According to B2B VAT cross border legislation there should have been no VAT application on eBay and Amazon fees going back as far as the business contract was signed”. Sellers are saying that If a UTR (Unique Taxpayer Reference) & letter confirming business registration is provided that should suffice, but eBay have only ever considered a VAT registration number as evidence for charging fees net of VAT.
The subject has only arisen since eBay stopped charging VAT on fees at the beginning of the year. Sellers are also mooting that the same applies to Amazon and are suggesting that VAT should never have been charged on Amazon fees either.
The tricky part however is that up until this year it doesn’t really matter what HMRC say, as eBay have for many years been charging Luxembourg VAT and thus were subject to the laws of that country. Remember that the UK is in a unique position having a VAT threshold beneath which businesses need not register and collect VAT, that’s different to most of the EU where all businesses register and collect VAT. With no de minimus threshold for the rest of the EU, all businesses would have VAT numbers so it’s reasonable that that’s the evidence Luxembourg required.
It’s only since the beginning of the year that EU legislation changed the way VAT is charged on electronically supplied services (which includes eBay fees). From the 1st January 2015 VAT is applied based on the country the customer is located, rather than where the supplier is headquartered, thus for the UK bringing it within the remit of HMRC, as eBay explain in the following statement supplied to Tamebay:
eBay complies fully with all tax laws in the jurisdictions in which it operates. Up to 31 December 2014, the fees eBay charged sellers were subject to the VAT rules applicable in Luxembourg. The Luxembourg Tax Administration position is clear – they will only accept a valid VAT ID as evidence of business status.
This means that for sellers in Luxembourg and most EU Member States, eBay is obliged to collect VAT if we do not have a valid VAT ID on file for the sellers. In the UK however, it is possible to use alternative evidence and we have confirmed this with HMRC. This means that from 1 January 2015 we are no longer required to collect VAT on fees to small businesses.
That statement is wrong.
By providing a service in the UK, eBay aren’t allowed to charge VAT to be paid in another country (ie: Luxembourg)
There should never have been VAT applicable to UK business sellers in the first place, as eBay are not domiciled in the UK
The Law change on 1st Jan 2015 only affected B2C contracts – i.e. did not change the law regarding B2B contracts at all. If a non VAT registered business gave proof that they are indeed a business and not a private individual then it is up the the company providing the service to deem if that is sufficient to change the contract from B2C to B2B.
When the law changed eBay saw this as a money making opportunity. They should have required proof of business from ALL sellers with business accounts, but no, that would have taken too much time, cost too much money. So they took off the VAT for ALL business sellers, regardless of their VAT status, just to annouce a few months later that the fees are being ‘simplified’ and rounded back up. All these pennies here and there certainly add up.
So the question is – Why is Amazon currently refunding VAT to non VAT registered businesses going back years, and eBay are not following suit?
Perhaps because they’ve just sacked that dept and there is no-one left to process it! What a sad state of affairs.
Could someone please say if this is true:
We, a USA seller, are an individual seller with no VAT number. If we sell to a UK customer and ship it ourselves from USA, does the Ebay or Amazon “fee” include the VAT, or is the VAT going to be taken out IN ADDITION to the “fee”.
“The Luxembourg Tax Administration position is clear – they will only accept a valid VAT ID as evidence of business status”
The above statement from eBay is totally incorrect.
Amazon are now refunding past years VAT added to fees , on production of a letter from HMRC, confirming date of business registration & UTR (unique tax reference number).
They too are based in Luxembourg, so must have passed this with the tax authorities there.
I think eBay are just hoping this will go away, as they have shown utter contempt to business sellers who have contacted them requesting a refund & providing proof of business status.