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Online Marketplaces VAT and how it applies to eBay

By Chris Dawson January 28, 2021 - 8:30 am

On the first of January 2021, for the first time UK marketplaces became responsible for collecting VAT on most sales from sellers based outside the UK. For imports of goods from outside the UK in consignments under £135 in value, HMRC will be moved the point at which VAT is collected from the point of importation to the point of sale and so online marketplaces VAT is now collected by eBay and other platforms. Even if an overseas seller fulfils from a UK warehouse, the online marketplace is still responsible for collecting VAT.

This isn’t a UK only change, the EU were scheduled to ape the UK but due to the pandemic have delayed the obligation for online marketplaces to collect VAT for overseas sellers until the 1st of July.

For eBay sellers, this means that any seller based outside of the UK will now have VAT collected on sales for less than £135. For UK sellers selling to the EU expect similar measures to apply to you from July.

Today, we take a look at what this means for both sellers and buyers and how VAT impacts selling and buying on eBay.

Online Marketplaces VAT and eBay

Does eBay add the VAT to the seller specified sell price (or bid) or deduct the VAT from the seller pay out

In cases where eBay is obliged to collect UK VAT, the buyer should see a VAT inclusive price in most cases. eBay are working hard on fixing the few instances where this isn’t currently the case. The VAT is deducted by eBay at the point of sale with the seller receiving the price net of VAT.

What does the buyer see if they are a UK buyer?

The buyer should see a VAT inclusive price in most cases. eBay will not charge a higher price at checkout. However, the exception may be when the purchase is made through auction format, where the buyer price is not fixed until checkout (the buyer will see messages throughout the purchase flow reminding them that VAT will be added at checkout though). eBay are working hard to fix this.

What does the buyer see if they are not a UK buyer with a non-UK address and so outside the scope of VAT?

If the supply is not subject to UK VAT collection by eBay, then the buyer experience will not include UK VAT.

How are Zero VAT/5% VAT supplies handled or is everything charged at 20%?

eBay is using third party software to ensure that the correct VAT rate is applied on items shipped to the UK.

Can the buyer get a VAT invoice?

Buyers can download VAT invoices from the order details in their account.

At the point of import, how do HMRC know the VAT has been paid?

eBay say that they cannot comment on the HMRC internal procedures. However, if the seller uses eBay shipping labels and eBay packing slips, when available, the information on these two documents indicate that eBay has collected UK VAT.

  • mark
    1 month ago

    dont understand!!!
    Are they saying my payout paid into my bank has had all the VAT tasken already.

    In laymans terms are they saying i list an item for £100 inc shipping are they saying i get £83.34 after ebay have taken the VAT.

    meaning i do not have to put anything in my VAT accounts or do i still receive £100

    So the money they pay into my back has already had the VAT removed YES or NO

  • 1 month ago

    Mark, are you based outside of the UK, as if not then this doesn’t apply to you.

  • Philip Reid
    1 month ago

    So, just to clarify, if I sell an audio amplifier on eBay UK for £100 to a customer in Italy, will:
    – eBay automatically add any VAT applicable (or is this postponed until 1st July?
    – if not, will VAT be applied by some other authority or is everything just exempt from VAT until 1st July?

  • 1 month ago

    If you are in the UK and sell on eBay to Italy you are responsible for sorting out any VAT that is due (until July when the EU will make eBay collect the VAT). This may mean UK and Italian VAT returns (plus any other countries you sell to).

    The reverse, if an Italian (or anyone anywhere in the world except the UK) sells a £100 product to a UK buyer then eBay will collect the VAT at the point of sale.

  • Tony
    1 month ago

    I thought sales from the UK to the EU were now zero rated vat and the customer would be charged the vat on receipt by customs?

  • 1 month ago

    Hey Tony, Zero rated in Great Britain, but lots of unanswered questions. e.g. if you are based in Northern Ireland you have to account for EU sales. If stock held in (for example Italy) then Italian VAT return needed….

    Plus for most people on their next VAT return there will be complex accounting for sales up to and including the 31st Dec plus sales from and including the 1st of Jan all on the same VAT return but treated differently :O

  • phil
    1 month ago

    This is a potential recipe for problems as Ebay have never been that great at getting software and system updates right. I will be regularly check that the totals are as expected. Just one more issue to add to the Brexit burden.

  • SAM
    1 month ago

    I was checking my items in e.g eBay France and their was no VAT added to the price and this was items above €22…
    So decided just to remove all items from sales to the EU till this is clearer. Besides it seems everything is going to be charged VAT anyway all over Europe anyway.
    Does this mean for example someone sells an item from say Republic of Ireland to Germany are they being charged VAT??? …or is this just UK..
    Seems like the VAT man is getting double bubble everywhere right now.
    Along with the Brexitshambles with customs and delays it just gets more surreal and complicated.

  • Mr Jones
    1 month ago

    “At the point of import, how do HMRC know the VAT has been paid?”
    LOL – they don’t know! When the parcel gets to the border, customs in the destination country will see Address Line 2 says something like “TAX PAID CODE ABC123”. That’s it, the code is the same for every parcel. No customs won’t know. It’s a sham which will be taken advantage of by ALIEXPRESS sellers using eBay’s VAT Number to get VAT FREE imports in to the UK/EU and beyond. All they need to do is print that so called code on the address.

  • Don
    1 month ago

    How are Zero VAT/5% VAT supplies handled or is everything charged at 20%?

    eBay is using third party software to ensure that the correct VAT rate is applied on items shipped to the UK.

    I have been trying to get a clear answer to this question, the answer in this article really isn’t an answer unfortunately. It does not clarify anything.

    Another question I can’t get a clear answer to: How is this affecting the HMRC VAT Flat Rate Schemes?

    So far I am under the impression ebay is overcharging buyers left and right by blindly applying the 20% rate. If this proves to be incorrect, and it probably should. I also wonder how this is going to be corrected, financially and legally.

  • Richard Asquith
    1 month ago

    Re reply to Mark saying if located outside the U.K. this does not apply to him, this is not correct.

    VAT is now due on all imported sales to U.K. consumers not exceeding £135. When provided via eBay, the marketplace will deduct from seller payment.

  • 1 month ago

    VAT is a rubbish tax and not fit for purpose in a global economy.

    Roll it into income tax. It’s individuals that pay it anyway, so that would be a fairer way to collect it and we wouldn’t have this ridiculous to me-to you Chuckle Brothers money merry-go-round, which must cost billions to run.

  • M g
    1 month ago

    If an item is used and sell for less than the original price, VAT seems nonsense. Surely there is no tax on second hand items!

  • 1 month ago

    @Gav.

    So how do you get the the Chinese to pay income tax….

    They dont pay any other tax hence there prices are so cheap. So for me slap them with import Tax and VAT to level the playing field for UK sellers

  • 4 weeks ago

    @ Derek

    The Chinese pay income tax in China

    As for their online sellers avoiding VAT by airshipping low value items, their prices won’t seem as cheap if they don’t have the advantage of no VAT, and if the imbalance in international postage charges was also addressed so that they were paying a reasonable rate for shipping to the UK, that would also have an impact.

  • 4 weeks ago

    @gav

    I couldnt give 2 rats about them paying income tax in China. That does not pay for the NHS. So the answer get shut of foreign sellers which this VAT charge is doinh.

    I spend approx £300 a month on Ebay as a buyer and do not purchase from Chinese sellers full stop. I support English sellers only

  • 4 weeks ago

    @ Derek

    I didn’t think you would give a rats 😀

    But VAT is still a rubbish tax, that is regressive, costly to administer and easy to defraud (meaning less to spend on NHS) There are better ways to deal with Chinese sellers and address the advantages they may enjoy.

  • Martin C.
    4 weeks ago

    I am an abroad seleler.
    There is currently one huge issue with the VAT not displaying correctly..
    When sending offers to “watchers” eBay is sending this offers to “watchers” without VAT. So for example when I send a 10% discount from item valued at 40, the buyer will receive an offer for 36, which they will accept thinking this is the final price. Then on checkout, eBay will add VAT to the 36 (which was not mentioned in the offer they received), so the buyer must pay more than 36 which they originally accepted!

    Each and every buyer who accepted my offer from January writes me a message about why the price increased and that I should fix it as this is not the price they accepted.

    This is very frustrating and time-consuming and so far it looks like no one is working on that,
    I have a lot of calculations because of this.

    I suggest that the correct way of eBay doing this is that the “watchers” should receive a notification about the offer already VAT included, so they can accept the final price (same as they see on “buy it now” price, which is already VAT included).
    It should be an easy fix which makes a sense, so let’s hope It will be solved soon.

    Anyone else having the same issue?
    Martin

    If there were no Brexit there would be no VAT either way nor in the UK nor in the EU since we would be still open EU market. Only for the imprts from outside of the EU.

  • 4 weeks ago

    @Gav

    We dont need better ways to deal with the Chinese the VAT squeeze will do.

    In 10 months time the Chinese will all be gone, who cares if EbayBuyers are paying a little more for a product if that means Bye, Bye to tax avoidence and the Chinese sellers

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