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eBay UK Spring 2017 Seller Release: eBay to charge VAT on fees

By Chris Dawson May 9, 2017 - 1:35 pm

eBay are making some changes to the way that VAT will be charged. There is no change to the fees themselves and these changes apply only to eBay sellers living in the UK.

Not to put too fine a point on it, Brexit is coming, the way that companies (such as Amazon, Starbucks and Google) have been paying (or avoiding paying) tax in the UK, and the incidence of Chinese sellers avoiding paying UK taxes have doubtlessly all been a contributing factor in this change being implemented. Sadly, for some sellers it’s going to cost you more, but it’s hard to argue against the change against the political backdrop and the way that some sellers themselves have been lobbying MPs to make changes.

What’s happening with VAT on eBay fees

From 1 August 2017, eBay sellers living in the UK will start contracting with eBay (UK) Limited instead of eBay Europe S.à r.l.

If you’re not registered as a UK Business Seller on eBay

eBay currently apply UK VAT at the standard rate of 20% to all fees incurred by UK based sellers that are not registered with eBay as a business seller. Nothing changes bar the billing entity.

If you’re a business seller Registered for VAT with HMRC

As a VAT registered business seller, eBay have always charged your fees net of VAT if you registered your VAT number with them.

From the 1st of August, you’ll begin paying 20% UK VAT to eBay (UK) Limited on taxable fees. The UK VAT paid will be identified on your eBay invoice and you can claim an input tax credit if you are entitled to deduct VAT. Although VAT registered sellers will begin to pay UK VAT on their eBay fees, you will likely be entitled to deduct this VAT according to UK VAT rules. As a result, VAT should not represent an additional cost to you.

Of course if you are on schemes (such as the Flat Rate VAT scheme) you will not be able to reclaim VAT.

If you’re a business seller NOT Registered for VAT with HMRC

From the 1st of August, you’ll begin paying 20% UK VAT to eBay (UK) Limited on taxable fees. The UK VAT paid will be identified on your eBay invoice but you won’t be able to reclaim it unless you register for VAT and enrol on a VAT scheme which allows you to reclaim input VAT.

The history and the perk that’s coming to an end

Many years ago all sellers paid VAT on their eBay fees – both businesses and private sellers. Eligible VAT Registered businesses could register their VAT number with eBay and eBay would then not charge VAT, but VAT Registered businesses were never allowed to claim the VAT back as an input on their VAT returns.

From the 1st of January 2015, eBay received a special dispensation from HMRC to charge all business sellers net of VAT. This meant that sellers who weren’t VAT registered didn’t pay VAT on their eBay fees and so effectively had a bonus of what looked like a smaller eBay invoice. Doubtless sellers in this position have become accustomed to not paying VAT but this dispensation is coming to an end as of August.

Here at Tamebay HQ we know that this is going to hit you hard – no one wants to pay more. The only way to look at it is with a touch of realism and be grateful for the past 30 months when you’ve paid fees net of VAT and accept that in the future the government is going to take it’s cut.

For sellers who are VAT registered, you’ll have to front the VAT when you pay your monthly eBay bill and reclaim the money from your next quarterly VAT return. Whilst you’ll pay out more to eBay, you’ll pay less when you come to settle up with the VAT man so for you it’s merely a cash flow issue, not a change to your business costs.

What it does mean, and what many sellers have been lobbying for, is that those sellers who masquerade as businesses and haven’t hitherto paid VAT on their eBay fees will have to start coughing up. Sellers who use fake VAT numbers on eBay or ‘borrow’ them from legitimate businesses will end up paying VAT on their eBay fees and won’t be able to reclaim it. That’s a good thing.

The only real losers are the business sellers who aren’t VAT registered and have enjoyed eBay’s VAT dispensation for a year and a half. Sadly we haven’t any good news or ruses for you to avoid paying VAT on your eBay fees going forward.

  • 5 months ago

    I know you briefly mentioned this but I would add to the list of real losers at the end people who are VAT registered but on the flat rate VAT scheme who this will simply be an increase in costs for with nothing in return.

    • Simon E
      5 months ago

      As a flat rate scheme user, time to have a look at the figures again and see if it’s worth continuing.
      We are going to have to fork out an extra £250 per month. Ouch!!!!

  • 5 months ago

    I wonder if my local shop would get away with asking me if I was buying for a business and adding 20% to the price if I said yes. The gap between private seller fees and business seller fees is now embarrassingly large.

    While private sellers are protected by consumer rules and so have wonderfully simple capped fees, even tiny businesses face an overwhelmingly complicated array of fees, nearly all of which are much higher than the consumer offering.

    • Tom
      5 months ago

      “I wonder if my local shop would get away with asking me if I was buying for a business and adding 20% to the price if I said yes. ”

      Sorry but what are you on about?!

      Ebay are not getting away with anything here, they are just charging VAT as per UK and EU law.

      Surprisingly pretty much everything you buy in your local shop will have 20% VAT built in to the price.

    • 5 months ago

      Just to spell it out:-

      Private sellers – FVF is 10% capped at £250. Inc VAT.
      Business sellers – a confusing mish-mash, but “everything else” is 11% + VAT = 13.2%
      Clothing @ 12% inc VAT
      Tech @ 9.6% inc VAT

      My example is wrong — the local shop is charging upto 30% more to businesses (unless it’s tech where Amazon is cheap so ebay has to be too)

      Tough on business, tough on the causes of business.

    • Tom
      4 months ago

      Sorry but I don’t think you understand VAT.

      If a fee was/is 11% it is still 11% inc VAT. Literally nothing has changed with what you are charged.

      The difference is…

      If you buy something in the UK for £120 inc vat as a vat registered UK business you pay £120. You can claim back the £20 on your VAT return.

      If you buy something from the EU for £120 they remove the german/french etc VAT so if it was 20% you’d pay just £100 and not be charged the EU VAT. BUT on you VAT return you have to pay out the UK VAT of 20% (£20) = the same £120 cost.

      So it literally makes no difference to UK VAT registered sellers.

  • Danny
    5 months ago

    Yes we’ll have to cough up the VAT upfront (but at the end of the day so do our customers on every purchase they make from us) and reclaim every quarter, but on the whole this is great news! Hopefully this will help level the playing field a little!

  • Andy R
    5 months ago

    There are a lot of small businesses on Ebay who use the Flat Rate Scheme and will be hit hard by this.

    Ebay have hugely underestimated the numbers here. All the sellers we associate with are on one scheme or another and will now have a 20% hike in all their Ebay fees, following on from the recent fee hikes already imposed by Ebay. This is yet more unwelcome news from Ebay in 2017.

    And why reduce the top rated performance from 4% to 3% ?

    Has the performance of delivery companies improved that much recently??

    Buyer expectations is one thing, but unless you get in a van and deliver it yourself, sellers are reliant upon Royal Mail or a courier.

    As their performance will be unchanged, it’s hard to see anything other than more sellers being penalised again.

  • Caz
    5 months ago

    Which fees are included, is it add 20% to the whole bill?

    • 5 months ago

      All fees Caz, the entire bill is subject to VAT

  • 5 months ago

    Im on the flat rate for VAT. My business currently turns over £220,000 on eBay. The introduction of the 20% VAT on fees would mean an increase in the actual fee itself of around 3.5% making the fee to trade on eBay 15.5%. Although eBay will argue that my fee has not increased per say on the site, the overall cost will be 15.5%. After speaking to my accountant, going on to the 20% bracket so i could claim back the 20% on the final value fee would enviably cost me more. Is this the final nail in the coffin. Its looking like it for me.

    • Peter
      5 months ago

      How can you be on flat rate turning over £220.000 just on eBay if the limit to be on flat rate is £150,000?

    • 5 months ago

      Your VAT taxable turnover has to be less than £150,000 to join the Flat Rate VAT scheme.

      You don’t have to leave the Flat Rate VAT scheme until your turnover exceeds £230,000.

      https://www.gov.uk/vat-flat-rate-scheme/eligibility

    • Peter
      5 months ago

      Exactly Chris. That means Daniel has to leave the scheme once eBay starts charging VAT on the fees. And we are presuming Daniel doesn’t sell at least 10.000 anywhere else at the moment…

    • 5 months ago

      Peter the fees are a cost, not a sale. Why would a cost increase someone’s turnover?

  • 5 months ago

    I’m all for this. Helps level the playing field a little between legit and dodgy.

    I have a “competitor” that I am sure is not only dodging his taxes but also claiming unemployment benefits. It’s the only way he could still be in “business”.

    • Joe B
      5 months ago

      Just because a legit business seller doesn’t pay VAT doesn’t mean they’re dodgy. It simply means they don’t have a high enough turnover.

      I’m not VAT reg but to imply that means I’m dodgy is extremely insulting.

    • 5 months ago

      Don’t see how I was implying non VAT payers are dodgy? My comment refers to people not paying the correct taxes. The so called “business” sellers that don’t declare their eBay income to HMRC

    • billy
      5 months ago

      i to am a small business that doesnt turnover enough to pay VAT. this along with the recent fee rises is going to hammer me. i make about £300 a month and recon the extra for me is £70 in fees a month. i sell in a very competitive market so cant up my prices. also royal mails recent price increase doesnt help. seems like everyone is trying to kill the smaller sellers.

  • Daniel Bulgacs
    5 months ago

    Im on the flat rate for VAT. My business currently turns over £220,000 on eBay. The introduction of the 20% VAT on fees would mean an increase in the actual fee itself of around 3.5% making the fee to trade on eBay 15.5%. Although eBay will argue that my fee has not increased per say on the site, the overall cost will be 15.5%. After speaking to my accountant, going on to the 20% bracket so i could claim back the 20% on the final value fee would enviably cost me more. Is this the final nail in the coffin. Its looking like it for me.

    • 5 months ago

      Im on the flat rate for VAT. The introduction of the 20% VAT on fees would mean an increase in the actual fee itself of around 3.5% making the fee to trade on eBay 15.5%. Although eBay will argue that my fee has not increased per say on the site, the overall cost will be 15.5%. After speaking to my accountant, going on to the 20% bracket so i could claim back the 20% on the final value fee would enviably cost me more. Is this the final nail in the coffin. Its looking like it for me.

  • Carolyn
    5 months ago

    It might help weed out dodgy sellers but just because you aren’t VAT registered doesn’t mean you are dodgy. I’m sure there are tons of small time sellers who will be severely impacted by this. My business is just a small time business, we file our tax returns and everything is above board, you can hardly hide ebay income! We are already struggling on ebay, our visibility on ebay has got worse and worse with less and less sales. We have tried changing so many different things but nothing helps. The only things that sell well are when we have multiple quantites of something, sell one and the rest flies out. But that is rare for us to get more than 1 of them. Having an increase of 20% is huge. I don’t mind the listing fee, that used to be 5p for us, but went down to 4p in 2015. But the shop fee is pretty high and adding another 20% to that is going to be massive! Also doesn’t that mean a 10% fvf will then be 12%? I thought VAT registered sellers claim that back, but for the sellers stuck in the middle we have to foot this bill when money is tight. I say stuck in the middle as private sellers get so many deals and free listings etc. I would assume most seller who are VAT registered must be making way more money than those who aren’t VAT registered. If they will be charging us sellers the same as a private sellers with this 20% VAT, then why aren’t private sellers paying 12% fvf. I average my sales on mostly 10% fvf.

  • Chris L
    5 months ago

    I am a bit confused on this. The UK is STILL in the EU and as I have an EU (German) VAT number registered, then the fees should still be EXCLUSIVE of VAT as in the past.
    Does anyone know how this will work with the EU Vat number.
    Basically any service provided in the UK to a holder of a registered EU Vat number should be invoiced exclusive of VAT

    Thanks

    • 5 months ago

      eBay will charge you 20% VAT on top of your seller fees. You can only claim this back if you are 20% VAT registered in the UK. If you are not then your paying 20% on the fees and you wont be able to claim this back. Your fees for selling on eBay go up and you get nothing in return.

  • Andy R
    5 months ago

    The people who lose here are specifically those on vat schemes.

    You don’t offset the vat you pay against returns, in return for a lower flat rate %.

    Which means those sellers now have to pay the full 20%, without being able to claim back a bean from HMG.

    So we’ve had the postal price hike.

    The Ebay shop fee and listing fee hike.

    And now this.

    Not to mention the botched attempt to hike NI for the self employed.

    Maybe it’s time to find another country – one that’s actually friendly to small business.

  • 5 months ago

    Am I right in thinking that there was a very significant FVF increase a couple of years ago. Just after eBay stopped charging VAT for ALL business sellers.

    • 5 months ago

      Hi Steven . You are correct. I don’t suppose eBay will be lowering there seller fee now that the VAT has been implemented.

  • LDW
    5 months ago

    This is brilliant news. We currently turn over £2m on Ebay and we’re sick of the small-timers who don’t pay any VAT. Great news – thanks Ebay!!!

    • 5 months ago

      I think it will push a lot of sellers who are “under” the threshold of registration to want to voluntarily register, meaning a more level playing field.

    • chrissieboy
      4 months ago

      I am a “small timer” who doesn’t pay VAT, legitimately as under the threshold. Also means i don’t claim VAT back. unlike you “big timer”. Although compared to some (Ebay, Amazon, Argos etc etc) you are a “small timer”, i would just call you a “wannabe” smug idiot.

  • Ignatius
    5 months ago

    @LDW – yeah yeah, twos up to all the legitimate small businesses out there delivering a quality service and working all the hours of the day on their tod to make an honest buck. Delighted you’re happy…

    • ldw
      5 months ago

      The fact is @Ignatius this makes it a MUCH more level playing field. Everyone has the same opportunity to EXPAND.

  • Gareth
    5 months ago

    Am I correct in thinking the VAT is applied to everything including FVF’s? Presumably this is already charged to sellers on eBay UK who are not resident in the UK?

    It seems a few of the larger sellers are joyous about it, thinking only of their own circumstances. It’s a hard kick in the teeth for all those legitimate self-employed businesses that operate beneath the VAT threshold.

  • steve
    5 months ago

    vat is included in the sale price,Is it correct that Ebay should get comission from the vat amount.

    • 5 months ago

      eBay charge commission on the final value price regardless of whether that includes VAT or not. Even if they wanted to they have no way to see how much the VAT on the sale price may be. They’d need to know if you’re VAT registered or not, if you’re on a special VAT scheme (e.g. the Margin Scheme) and be certain which VAT rate applied to the product. You can understand why they might not want to get into that quagmire!

    • 5 months ago

      nice question, one which I have pondered many a time. i am sure the FVF will be dressed up as a charge on the gross price on the t and c’s somewhere

    • 5 months ago

      Gurpeet, many years ago eBay allowed sellers to add VAT to the final value leading to buyers having to pay more than they bid. They then banned this (along with shipping surchages and the like) and mandated any VAT charged had to be included in the final value which the FVF is based on.

      If you think about it – how could eBay possibly know if a £120 product which was sold to someone with an eBay account registered in the UK, with a German primary address but despatch to an shipping address outside the EU (because the buyer was working overseas for 3 months) included VAT or not? That’s before discussing what VAT rate may be applicable and what VAT Scheme the seller may be on!

    • 5 months ago

      nice example Chris, exactly why I built CBV!

  • 5 months ago

    welcome news, hmrc is finally rolling it up its sleeves

  • 5 months ago

    Now this has happened with EBay I bet Amazon will be next without a doubt as they normally follow each other.

  • Rich
    5 months ago

    As VAT is a EU wide concept presumably with brexit the government will be cancelling this tax in it entirety 😀

  • Rob
    5 months ago

    It’s ok the ebay packing voucher for over priced goods will help offset the cost of VAT that will be getting added on to monthly bills soon.

  • Wayne Neale
    5 months ago

    It was not a dispensation. It’s the law that B2B sales are taxed where the recipient belongs.

    It was never the law (and is not now either) that this only applied to VAT registered businesses. Try telling that to EBay, Amazon, LinkedIn etc who all get this rule wrong, often costing business customers money as they are not required to pay under reverse charge rules being under the threshold.

  • 4 months ago

    Hi All

    I understand that eBay are just charging VAT on their fees accross the board. I’m a UK business seller but am well below the VAT threshhold and not registered for VAT. I do pay my taxes and am registered as a sole trader with HMRC.

    I sell second hand vinyl records, most of which are sold to outside of the EU (China and the Far East mainly) so would not be subject to VAT anyway. Is there any way eBay will reduce the VAT element based on this? I live in hope (probably falsely).

    Thanks

    • 4 months ago

      This is open to debate. We as sellers must push the issue on with eBay to let them know the severity that looms upon us.

      As per a previous message here on this issue… I think eBay have fully underestimated this condition for there sellers, and i believe this will have massive losses for eBay due to seller ceasing to trade on the site.

      I know eBay is listening in, i know there agents are for sure. I would hope that the agents are pressing this issue with the powers that be so that there fully up to date and understand that this has massive complications for there sellers.

      eBay didn’t even make this a priority in there news letter. This issue should have been there headliner in the news letter. Instead it was down towards the bottom and not really high lighted than one simple line of text.

      Not many sellers are aware of this. eBay really need to point this out better than they have for sellers. They would then and only then understand how many sellers this will effect.

      The message they put into the news letter only states that it “wont affect” businesses on VAT but what they should have been putting is, If your not registered or your on the lower VAT scheme this will effect the way your business runs.

    • Tom
      4 months ago

      It makes no difference to you as you are not VAT registered, you will now just paying UK VAT instead of Luxembourg VAT on Ebay fees. The cost to you is the same.

  • George
    4 months ago

    Hi there,

    Anybody knows what would happen with UK sellers with residence in other European countries? I see many greek sellers registered as Business sellers, yet their address at the bottom of their listing is either a “rented” UK address or an address elsewhere in Europe (perhaps their own home or office)

    Thanks

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