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Comparing changes to UK VAT and Australian GST on eBay Fees
In the UK private seller fees already include VAT. There will be no change here, but the billing entity will change to eBay (UK) Limited instead of eBay Europe S.à r.l. from August this year.
Goods and Services Tax (GST) of 10% will be applied to private seller fees and will be shown on eBay’s monthly invoices from July 2017.
Until August this year, if you are a registered your eBay business then you paid fees net of VAT. From August this exemption ends and VAT will be added to your eBay invoice. You may or may not be able to claim this back depending on whether or not you’re VAT registered and if you are VAT registered which VAT scheme you are on.
If you have a valid Australian Business Number (ABN) and are registered for GST, you can get an exemption by registering your ABN with eBay and no GST will be applied to your eBay fees. This is pretty much the current situation in the UK until it changes for UK sellers in August this year.
Why the differences?
It’s important to realise that eBay don’t have that much say in how tax in any particular country is applied. What they do have is control of the fees net of VAT. However the VAT element is not something that we can lobby eBay about, that’s something for you to speak to your MP and lobby the government.
The fees that eBay charge are under eBay’s control. Here at Tamebay we think that fees for business sellers who can’t reclaim VAT will be too high after August (higher in some categories than those for Private Sellers) and we’ve not been shy about saying so.
What should UK sellers be considering regarding eBay fees and VAT?
If you’re currently unable to reclaim VAT on eBay fees, as a business seller there are really only two options open to you, other than simply paying the VAT:
- If you’re not already registered for VAT, consider if it’s worth doing so. You’ll need to consider not only the VAT you can reclaim from eBay fees but also the VAT you can claim from stock purchases and other expenses and balance this against the VAT you would have to charge on sales.Generally the higher your margins (i.e. the less you stock costs) the less attractive it is to register for VAT. When all’s said and done and you balance VAT reclaimed on stock against VAT collected on sales you effectively only pay VAT on your profit margins.
- If you’re on a VAT scheme (e.g. the Flat Rate VAT Scheme), consider the pros and cons of moving to a VAT scheme which enables you to reclaim VAT on costs. There will be a time implication as your VAT return will be slightly more complicated, but that’s something which can generally be solved with software.
The 2 key benefits of schemes e.g., the Flat Rate Scheme, are that you get a lower rate of VAT to pay (in exchange for not claiming VAT expenses back) but crucially you get a simplified three box return to fill out each quarter, instead of complicated standard returns.
Ebay has dumped on VAT scheme users with their changes, who were not consulted about this major change to how VAT is charged on their fees.
I have looked on all my ebay invoices and there is never any mention of VAT anywhere.
So to me its as clear as mud. I telephoned eBay about the spurios picture feews of £2.50 and while on the phone i asked about VAT and the chap said invoices will continue to come with no VAT on it if i am VAT registered which i am.
So i am still lost as to where this vat will be added or show.
Don’t registered for VAT unless you legally need to. The hassle, time and money in producing VAT accounts far out weighs any benefit you would gain from reclaiming the vat on ebay fees. Also as already mentioned you would also have to pay vat on the profit margin making you generally less competitive than those sellers who don’t pay vat.
Benefits of being VAT registered?
I would think that was easy to work out. Every three months you give the VAT man a percentage of your sales.
Forget the benefits to you, of being able to reclaim VAT that you pay out, bottom line is, you lose money.
Calculating the VAT is quite easy, you let computer software do it, either using an accounts package or a simple spreadsheet, you just enter the data. At some point we have to do accounts, so it is just using the same data on a three monthly cycle.
You can’t lose what isn’t yours.
The VAT on sales is never your money. You simply collect it for the taxman.
It really depends on your point of view.
A small business that reaches the VAT threshold and has to start paying VAT will probably feel they are losing money every three months. From experience, you do not usually gain money from being VAT registered.
Once you become VAT registered, you do not generally add VAT to your prices, an item that you sell for £30 will find you paying the VAT man £5 from the sale, which you did not have too before being VAT registered.
On the plus side, you an claim back the VAT you pay ot on your costs & expenses, but overall you will be paying more to the VAT man than you claim back.
To your average small business retailer, the above equates to “losing” money.