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The Biggest Tax Mistake An eBay Seller Can Make!

March 4, 2013 by Andrew Minalto - 291 Comments
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…is to register for VAT (Value Added Tax). Yes, registering as a VAT payer when you don’t have to is the single biggest VAT related mistake you can make as an eBay seller. Why? Because by doing that, you become less competitive on eBay’s marketplace where the majority of sellers are not VAT registered.

I know this may initially all sound too complicated and confusing so let’s cover the VAT registration process in detail, and both the advantages and disadvantages of becoming VAT registered.

The whole VAT system is quite complicated, with many exceptions and special rules. I won’t go into minute detail on every aspect of VAT now but if you want, you can read all the information about it on the HMRC website.

I’ll keep this blog post simple and straight to the point – so that you, as an eBay seller, get a clear idea on what VAT is and when you should apply for it.

VAT Rate Explained

The current standard VAT rate in the UK is 20% (as of 4th January 2011). There’s also a reduced rate of 5% applied to some specific goods and services (eg children’s car seats) and zero rated goods & services, such as children’s clothes. We’ll go into more detail on these exceptions in a minute.

The VAT rate is not fixed across all European Union countries so if your business is based outside of the UK, you will want to check your local authority’s website to find out the VAT rate in your country. For example in Ireland, the standard VAT rate is currently 23%, while in Luxemburg it’s just 15%.

When Should You Register for VAT?

You should register for VAT ONLY when you reach the “VAT threshold” and registration becomes mandatory, which currently stands at £77 000. The VAT threshold simply indicates the maximum turnover a business can have had over the last 12 months and still remain / work VAT free.

So for example:

If your turnover over the last 12 months is £50k, you don’t have to register for VAT.
If your turnover over the last 12 months is £80k, you do have to register for VAT.

IMPORTANT!!! If you go over this threshold only temporarily (due to a large, one-off sale, a Christmas promotion etc.) you can apply for exemption from registration. You’ll find more details and information about this on the HMRC website.

To put it simply, you must register when your 12 month turnover exceeds the VAT threshold which is £77k as of today (March, 2013). This figure change almost every year (it’s announced in the annual Budget), so make sure you keep up to date with the current rate.

Also this turnover INCLUDES goods that are ZERO VAT rated – so if you deal with zero rated goods, you HAVE to register for VAT when you go over that threshold. It’s mostly services that are zero rated but there are also a few products, here are some examples:

  • Equipment for disabled people
  • Books
  • Maps
  • Magazines
  • Baby wear
  • Children’s clothes and footwear
  • Cycling Helmets
  • And others…

You’ll find a full list here: http://www.hmrc.gov.uk/vat/forms-rates/rates/goods-services.htm.

So if you’re dealing with these products, even partially, you will have to INCLUDE sales of these products in your total turnover.

You can of course register for VAT voluntarily at any time but you should really think twice before doing anything like this…

You Should Avoid Registering for VAT for as Long as Possible…

Because when you do, you’ll have to pay more tax, as simple as that. You’ll either have to raise your prices to make up the difference which will make you less competitive OR you’ll have to lower your profit margin to keep the same pricing as before. And it doesn’t matter how you look at this – when you register for VAT, you pay more tax, PERIOD!

That’s why it’s so crucial to stay away from VAT registration for as long as possible. Applying for VAT voluntarily may be the biggest mistake you ever make; it can simply kill your eBay business as in just one day you’ll become uncompetitive.

That’s not even considering additional accounting expenses, as when you become VAT registered; accounting becomes even more complicated than before… VAT returns quarterly or monthly based on your return + each transaction booked now comes with an additional, VAT, field.

I personally started outsourcing accounting completely from the day I become VAT registered as I simply don’t think it’s worth the hassle and time doing this for yourself.

So yes, being VAT registered you’ll also face more expense with accounting. Even online accounting software programs usually have Basic and VAT versions, where the latter is more expensive of course.

THE ONLY exception would be IF you’re selling ZERO VAT rated goods. In this case you’ll be able to get MORE in VAT you’re paying in your expenses than what you take in on sales (ZERO).

So if you’re selling ZERO RATED goods, you would benefit from VAT registration from day one when you start your business.

But Andrew, how about reclaiming VAT on purchases?

Yes, that’s true, when you become VAT registered, you’ll be able to claim VAT back on all business purchases you make. This will include VAT on items you purchase for re-sale, packaging supplies, eBay fees and other related expenses.

But here’s the thing most eBay sellers don’t realise – the amount of VAT you claim back on purchases will be LESS than you take in sales meaning at the end of the day you’ll pay the government EXTRA tax.

For example:

* You buy £1000 + VAT worth of goods in one month (£1200 in total). VAT paid – £200.
* Your other VAT reclaimable expenses for that month (packaging materials, fees etc.) are £240, so VAT part – £40.

So your total VAT for purchases for that month was £240.

Now let’s have a look at your sales:

* You sold all those items for £3000, VAT included.

* This means you took in from sales £500 in VAT.

In your VAT return it would look something like this:

VAT from sales (£500) MINUS VAT from purchases (£240) = £260

This means you would have to pay the government £260 pounds in tax for the last month of trading.

Does that sound like a good deal to you?

Of course not!

As if you were not VAT registered, you would NOT have to pay any of this.

What’s the solution?

Keep trading VAT free for as long as possible. If you temporarily go over the threshold, apply for an exception.

If you see that you are going over the threshold but only by a minimal amount (say £1k or £2k), it may actually be a good idea to reduce sales a bit, to stay just below the threshold. But do this ONLY if you know that you can’t make bigger progress and reach say £100k in sales next year.

In all other cases, you have no choice but to register for VAT when the time comes. At that stage (£77k turnover over the last 12 months) you should have built a solid business, selling profitable items with good margins, and have your own online presence. Then you can be more flexible with pricing and profit margins.

However it’s very difficult to survive when you’re VAT registered and sell ONLY on eBay, unless your margins are very good (like with unbranded products). You’ll essentially be competing with all the people who are not VAT registered and therefore at a competitive advantage to you.

I’m not saying it’s not possible, it definitely is (take me for example or any other large eBay sellers – they’re all VAT registered) – if you buy in true wholesale quantities  directly from manufacturers in China then you can still make profit on eBay even when VAT registered, it’s just more difficult.

To sum it up – stay away from VAT for as long as possible! As registering voluntarily really may be the biggest mistake you can make for your business!

Thanks,
Andrew 


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291 Comments
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  1. If I do become VAT registered to I have to pay vat even if I dont go over 85k? I was considering it as a supplier will not deal with me without a VAT number.

    1. Andrew Minalto

      Hi Andrew,

      Yes, once you become VAT registered, you have to charge/pay VAT on all sales – no matter what is your turnover.

      Thanks,
      Andrew

      1. Aaron Reese

        Not quite true…
        If both companies share a ‘significant’ controlling interest (i.e. same shareholders and/or directors) then HMRC can lift the ‘veil of incorporation’ and treat them as a single entity if they think that separate incorporations have been made to avoid VAT. The short answer is talk to your accountant.

  2. Hi Andrew

    Thank you for providing such a clear and helpful article on this subject. I’m not sure if you are still responding to questions but thought I would ask.

    I’m not above the VAT threshold of 85k and keep below this for all the reasons you have specified. I have an eBay business. There are occasions where buyers will return an item for a full refund. My question is whether refunds are also counted in the total turnover. I would assume that they weren’t but I’m not certain. If they were counted in the turnover it wouldn’t make sense as I will still sell the item, perhaps the following week and if they are counted then it would mean paying VAT twice on the same item if registered. Hope this makes sense.

    Kind Regards

    Andrew

    1. Andrew Minalto

      Hi Andrew,

      Thanks for your comment. Yes, of course, I’m still doing it! 🙂

      The answer to that question is complex and based on the accounting rules/system you run your business under. I’m afraid I can’t give you an answer here as there are too many variables. You should consult your accountant about this.

      Thanks,
      Andrew

  3. Colin Mayhew

    Hi Andrew,
    interesting article. Definitely food for thought.

    Here’s my question. I have a web design business, just myself, no employees, and I’m also looking at starting an eBay based business, and running the two together. When deciding whether I have to register for VAT, will I have to add the turnover of both businesses together to arrive at the threshold figure or is each one business treated as a completely separate entity for VAT reg purposes?

    Colin

    1. Andrew Minalto

      Hi Colin,

      If it’s the same company (same legal entity), you have to sum up turnover from both “divisions”.

      But of they’re two separate companies, you don’t have to sum turnover, no.

      Thanks,
      Andrew

  4. Hi Andrew
    Thanks for the post.

    If I exceed the Vat threshold (currently £85k), as a B2C business I will not be able to raise the price and thus will have to absorb the cost of VAT myself.

    As a result, this will mean that my vatable revenue will immediately reduce to £71k, thus below the threshold, which in theory should allow me to immediately deregister for VAT.

    Therefore do I need to register for VAT at all?

    Many thanks

    1. Andrew Minalto

      Hi There,

      I’m afraid it doesn’t work that way, no.

      Yes, you have to register for VAT if you exceed the threshold and then you can de-register in future if you go below the threshold.

      Andrew

  5. Martin Dimitrov

    Hi Andrew.
    I had that big mistake.
    UK company VAT registered from day 1. Everything was fine when worked with big companies. Flat rate pay 11%. But now on ebay goings terribly. So, do you know any options for deregistation. I’m with turnover around £36 000 annually.
    Many thanks

    1. Andrew Minalto

      HI Martin,

      If your turnover is below the threshold, you can easily deregister from VAT.

      Just contact HMRC and ask them for the form you need to complete for this.

      Thanks,
      Andrew

  6. Hello Andrew
    This is some priceless info for anyone considering going over the VAT threshold.
    I recently moved and instantly struggled to maintain previous years turnovers. Actually my previous turnovers were already dropping. I basically made my business not profiting and have now de-registered.
    A simple example for a sole trader – you have a turnover of 80K and manage a profit before tax of £25K. Happy days. You work harder working weekends etc & manage a turnover of say £95k. This now means you pay VAT on the whole lot (depending of-course which scheme you are using) and now you might only earn £15k Despite all the extra work!!
    I would suggest only going over if you can substantially increase your turnover to 120-150k plus. In my opinion they are killing business with these VAT rules and they should look at changing the already ridiculously complicated rules where by you have the first say 80k VAT free but if you managed to increase turnover to 110k you pay VAT on the 30k. This would encourage business not kill it. But as Andrew suggests ‘live with it’ – this is business!
    good luck
    andy

    1. Andrew Minalto

      Hi Andy,

      Thanks for stopping by and thanks for your comment – you’re dead right on this.

      Many people should seriously reconsider their business strategy before registering for VAT as at the end it could be that you sell more, work more but make less in profit.

      There’s also an option to ask for a temporary exception from the registration IF you think that you will go over the threshold for a short period of time.

      Thanks,
      Andrew

  7. Hello, Andrew

    Thank you for all your valuable information you gave.
    Most valuable person for Ecommerce I have found on the Net.

    So, I have started selling on eBay.co.uk, made a company which is still not VAT registered.

    My business model for now is Retail Arbitrage, so I have to make 60, 70 maybe 80 000 turnover per month to make a decent profit, my profit margain is around 10%.

    I hava to register my company to be VAT when I achive the threshold, but as you have written adove I have to decrease my profits to stay competitive. Therefore the work will be the same and the profits will be much smaller.

    Could you please give more solutions, is there any “doors in the law” ?

    One solution is to make 12 companies, 1 company per month.

    I am looking forward to your response.

    Hristiyan

    1. Andrew Minalto

      Hi Hristiyan,

      Thanks for your comment.

      No, there are no such “doors” – you either play by the rules or get into shady tax evasion schemes.

      IF your business is not profitable when VAT registered, it is not profitable and you should not be running it, period.

      Andrew

      1. Hristiyan

        Hello, Andrew

        Thank you for your reply.

        Therefore could you please tell me what business model were you doing on eBay?
        Wholesale Products?
        And what is you business model on Amazon.
        Thank you.

        If you have already told about this, please post a link to read the article.

        I am looking forward to your response.

        Hristiyan

      2. Andrew Minalto

        In the very beginning on eBay, I was doing branded products, drop shipping, wholesale & li9quidation.

        But I quickly realised that margins with those models are not sustainable and moved over to Private Label products business model – same I do on Amazon right now.

        Thanks,
        Andrew

  8. Maria Gabriella Johnson

    Firstly a big THANK YOU for your warning. Now I know, I should not register for VAT.

    I have a question, I have been looking for an answer online, but I was unable to find any.

    At the moment I am working in an office and I earn about 30 k yearly (my employer pays the tax and I get my salary after the tax).

    I will try to sell some of my paintings on Ebay , Amazon and Etsy.

    If I will sell 1 painting and if the buyer will demand an invoice, can I produce an invoice without VAT? Or do I have to produce an invoice to the buyer by law?

    Instead of an invoice can I produce a receipt? Do I need to buy a software for a receipt?

    Also if I produce a receipt, I don’t need to pay taxes , isn’t it?

    1. Andrew Minalto

      Hi Maria,

      Thanks for your comment.

      First of all, if you want to start a business, you need to register with HMRC – set-up an Ltd. company or register as a Sole Trader (easiest option). For this, you don’t have to register for VAT. VAT is a separate thing from business registration.

      Once you’re registered, you can provide invoices to customers – they won’t have VAT as you’re not VAT registered. You can create invoices using any free online software or even Excel or Word. And yes, you will have to do your yearly tax returns as a Sole Trader and pay taxes on your profits.

      Thanks,
      Andrew

  9. Hello, thank you in advance for your answer time.
    I am close to 85,000 pounds turnover for 12 months, and my question is can I put my eBay store on vacantion mode for two or three months, whereas the previous months I’ve made a big deal are no longer in the last 12.
    For example
    10.2018 – 15 000k turnover
    11.2018 – 15 000 k turnover
    12.2018 – 15 000 k turnover
    01.2019 – 5000 k
    02.2019 – 5000 k

    and then when i am close to 85 000k to stop selling until 12.2019. so the October and November will be no longer in the last 12 months.

    1. Andrew Minalto

      Hi Emil,

      Thanks for your comment.

      Yes, you can definitely do that and many sellers are doing exactly that – they slow down sales or take a break just to stay under the £85k threshold. Temporary this can work but in long term, you, of course, you will never grow your business if you stay below the VAT registration threshold.

      It is perfectly legal.

      Thanks,
      Andrew

  10. Hi Andrew,
    I am not a UK citizen, I do not live in the UK, but I use UK IP for the last few months, and recently I’ve noticed that I have been taxed with VAT 20%. Do you think that is correct? I sell on eBay for 3 years now and I have never been forced to pay VAT before. Thanks and regards.

    1. Andrew Minalto

      Hi Vessi,

      Thanks for stopping by.

      Yes, that is correct. You should be charged VAT on eBay fees.

      Thanks,
      Andrew

  11. Hi andrew EBay take 20% off vat from sellers on fees if you are not hitting the 83k threshold on eBay is it still not worth it to be vat register

    1. Andrew Minalto

      No, as you would still end up paying more in VAT to the government.

      The math is actually very simple when you fully understand how VAT works. At same prices, you will always lose out being VAT registered.

      Andrew

  12. Hi Andrew, I am trying to setup a basis for b2b with a m.o.q from the source to the trader/customer for a product which will be resold with only a 20% profit taken. Considering that the stock is projected to be sold alot outside of my home country(UK) and the source of dispatch is HK : 1. Would I not need to register for vat as best interest? 2. What portion of the cost would be vat? I will be using a single product e-commerce site with blogs etc on the site and I’m also doing my best to figure a root to create accounts for leads to complete so that invoicing can be provided and they can also see purchases in their login. I’m not outlaying on the product, I have been listing potential customers to contact so that all costs are covered.

    1. Andrew Minalto

      I’m afraid I won’t be able to provide advice on such multi-country drop shopping schemes.

      You need to contact a qualified accountant/tax advisor to help you with this as it’s a complex matter.

      Andrew

  13. Great article and exactly what I have been looking for. I seek used clothing on eBay and am just under the threshold. I had plans and the chance to grow by x4 times over the next 24 months but now I feel it is unfeasible and too much work to account for every item bought and sold when each item is unique. Quite sad and disheartening.

    1. Andrew Minalto

      It’s called BUSINESS! 🙂

      It is what it is. You either accept the rules or leave it.

      Andrew

  14. Hi Andrew i recently started my online ebay business and so from reading this inless you exceed you VAT threshold you dont have to pay tax is that right? Thanks

    1. Andrew Minalto

      Hi Steve,

      This is about VAT – you don’t have to register for it until you reach the threshold, yes.

      BUT there are situations when you have to register from day one in another country, like IF you store goods in another EU country (very common for Amazon FBA sellers).

      Andrew

  15. Marek Piskorik

    Hi Andrew,

    brilliant post, thank you.

    I am currently in the process of setting up a business on Ebay, selling used photographic equipment. I am registered as a business seller and I source from Ebay. NOTE: I am based in the UK.
    The anticipated trade amount should not exceed the VAT threshold in the first year.

    My intention is to sell worldwide, however, I am a bit confused by VAT regulations for EU.
    As far as I understand it, when selling to EU I should be adding the respective VAT to the final price for buyers from EU? Is this correct? Or is it only once I reach a certain threshold when dealing with buyers from that specific country?

    As for the rest of the world, it appears I do not have to add VAT as these are classed as “Zero-rated”.

    Could you please provide some clarity on this subject?

    Kind Regards
    Marek

    1. Andrew Minalto

      Hi Marek,

      Thanks for your comment.

      IF you’re NOT VAT registered, you don’t deal with VAT at all. You don’t add or take off VAT for any specific sales or customers.

      You’re NOT allowed to charge or show VAT on invoices if you’re not VAT registered.

      Andrew

  16. Hi, my company already uk vat registered ( eBay) and sales more than 99k. Selling worldwide except Asia. Importing from china . Paying import tax. My question is : do I need to pay vat on eu sales . If yes , how it can be because it’s one type of export. Isn’t it?is threre any way to calculate vat on eu sales from uk. Please reply. Thanks

    1. Andrew Minalto

      Hi Kali,

      Yes, you have to charge VAT on sales to customers in EU unless they provide you with a valid VAT number.

      Thanks,
      Andrew

  17. chinyere ogwuegbu

    Hello Andrew.

    I am about to begin drop shipping on eBay.co.uk but eBay didn’t allow my first listing because I live in Greece and will be sourcing and selling items to people in the UK. They said I have to contact hmrc for info on how to proceed. I have absolutely no idea what to do and I’m sure that I won’t do business of up to 70,000£ in the first twelve months. So how do get past the hurdle? Any advice you can give will be very helpful. Thank you!

    1. Andrew Minalto

      There are NO thresholds IF you live outside the UK BUT will keep the stock in the UK and sell to the UK market.

      You have to register for VAT in the UK from day one.

      Andrew

  18. Hi!
    So I am based in the UK and about to form a company (undecided of type) and open a bank account but my business is dropshipping.
    The products are based in India and sold to non UK customers. Some in the EU and some outside the EU, and very rarely in the UK.
    I am confused about VAT (and corporation tax, but who isnt!). Clients will pay me in the UK and I will have to pay my supplier in India for the product and shipping costs. I expect a turnover in excess of £100,000 in my first year with profit margin of 30%.
    I could really do with some advice before shooting myself in the foot.

    1. Andrew Minalto

      You should consult an accountant to find best way to set this up, to stay in line with law and pay lowest tax rate possible.

      But in theory, if your goods are stored in India, you should not need to register for VAT in the UK UNTIL you reach the VAT registration treshold. After that, you will have to pay VAT in the UK and in future, also in Europe (when you reach distance selling VAT thresholds in other countries).

      Andrew

  19. Hello Andrew. Cool blog.)

    Please, help me to understand!
    I am citizen of Belarus and leave in Belarus, now sell on ebay and take money through paypal to my account in Polish Bank. My registred addres of ebay in Belarus and ebay dont take any VAts. But if i change register address to Poland, ebay begin include VATs in ebay fees invoice. So, I send all my items from Belarus to the world wide buyers and i dont import items in Poland and EU. I dont pay any VATs. Will i have problems with polish tax governmen, because i use Polish bank account? Should i register as Vat payer in Poland?
    Thank you very much)
    Greetings from Minsk

    1. Andrew Minalto

      Hi Anton,

      With questions like these please consult an accountant as I can’t really provide qualified advice on tax issues.

      As far as I can see – IF you would use a Belarus bank account, you wouldn’t have any problems whatsoever (as you’re outside EU) but as you use that Polish bank account, I don’t know really how that affects the whole situation…

      Andrew

  20. Hi Andrew
    I have also thought the same as you avoid registration however I find my self being asked for vat receipts more and more due to the type of products I am now selling pretty much all my competitors seem to be using the fact that a VAT receipt is given as a selling point and according to Terapeak are selling 3 to 4 times the quantity I am at a higher price
    I am left with the thought that my customers are tradesmen and will actually pay more for an item due to the 20% they lose from vat returns by buying from me would you agree in this case ?
    Due to the nature of registration ie you can not unregister its a bit of a decision I’m facing

    1. Andrew Minalto

      Hi Chris,

      Thanks for your comment.

      Yes, that could be the case IF the product is bought mostly by tradesman as you say, so majority of transactions would be classed as B2B. Then it would be worth registering for VAT to get in more business.

      BUT you really must be sure that B2B customers make LARGE portion of your potential customer group as if it’s just 10%, it’s still not worth registering for VAT.

      Thanks,
      Andrew

  21. Hi Andrew

    Hope you are well.

    I sell goods on ebay on the behalf of other companies and private individuals for a commission. I never actually own/purchase the stock: I sell it, the money comes into my account, I deduct my commission and transfer the balance to the original stock owner. As far as I am aware my VAT liability is the cumulative commission invoices and not the actual eventual sales figures I achieve upon selling the equipment, the key thing being that I don’t actually own any of it?

    Would you be able to give me your thoughts, please?

    Thanks and regards

    1. Andrew Minalto

      Hi James,

      Thanks for your comment.

      I don’t know for sure but I think you would have to use the TOTAL sales number for VAT calculation threshold as all that money goes through your accounts…

      I may be wrong so better get an accountant’s opinion on this.

      Andrew

      1. Thanks for your reply, Andrew.

        Regards

  22. Hi Andrew,

    Let say I have a UK ebay account and say the turnover will surpass the threshold, do I have to register for VAT on these condition

    1 ) If I source from US, sell in US market
    2) If I source from China, sell in US market
    3) If I source from China, sell in UK market

    Thank you
    Han

    1. Andrew Minalto

      Hi Han,

      Yes, yes, and yes.

      All these situations will trigger VAT registration if you reach the threshold because it will still be your UK company who receives all those sales.

      The difference though is how you will apply VAT – for example – when you sell in the US, you won’t have to charge VAT.

      But those are details you need to discuss with your accountant.

      Thanks,
      Andrew

  23. Hi Andrew,

    I am located in Slovakia, and about to start sell in the UK using Amazon FBA. I dont think that my treshold will be above that 83k in a year.
    I just paid a VAT service to register me for UK VAT.
    Did I make a mistake?
    She said that it will impact my money in a positive way, but at this point I am started to doubt it.
    If I am living in Slovakia, and I want to store goods in UK in Amazon FBA centers, do I need to register for VAT? will it affect my profit in a good or bad way?
    If I have to, would it be a good idea to register for a UK based company as well?

    I would really really appreciate your answer.

    1. Andrew Minalto

      Hi Pali,

      Thanks for your comment.

      Yes, if you’re based in Slovakia and plan on selling in the UK, using Amazon FBA, you NEED to register for VAT in the UK from day one.

      So you did the right thing.

      I will have a more detailed post about the whole VAT thing next week, so stay tuned for that.

      Andrew

  24. Hi Andrew,

    I have turned over £84k in the last 12 months.
    Worried that next tax year will be well over the current £85k threshold.

    I buy and sell used / second hand goods – furniture, antiques etc…
    Will I have to charge VAT on these items?

    I heard something about a margin scheme?

    Thanks,
    Harry

    1. Andrew Minalto

      Hi Harry,

      Yes, that is correct – you’ll have to charge VAT on your sales when you become VAT registered.

      There are various VAT schemes available, like FLAT RATE VAT scheme, so please study them carefully to pick one that suits you best:

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

      I would advice you to speak with an accountant who can recommend best way to move forward taking into account your current business specifics.

      Thanks,
      Andrew

  25. Hi Andrew, great page on VAT.

    I have a query. If I run a UK business and sell just one item via eBay.co.uk in a 12 month period at a sale price of £90,000 with fees of say £10,000 which total would I use towards working out my VAT threshold? Would it be the 90k (thus meaning I need to become VAT registered) or the 80k I ‘actually’ receive – thus meaning I keep below the VAT tally?

    1. Andrew Minalto

      Hi Graham,

      The £90k of course – your sales.

      Sales is what matters here – that’s the turnover and that’s what triggers VAT registration.

      Thanks,
      Andrew

      1. Graham

        Thanks for the help Andrew. One final query…..

        I have an eBay shop, registered as a business seller etc. About 12 months or so ago I noticed that on my eBay fees page the sale of item fees (know as FVF Final Value Fees) have increased 20% with a note on the screen stating ‘The above amount includes United Kingdom VAT’. Does this mean I am now officially paying VAT on my sales, or that eBay are adding 20% to the Final Value Fees?

      2. Andrew Minalto

        Hi Graham,

        No, you’re not paying VAT on your sales.

        This just means that eBay started charging VAT on their fees from the UK.

        Andrew

      3. Graham

        Thanks again Andrew, I had a very interesting chat with a friend of mine who attended a HMRC course and was told the exact same as what I found below online. Would you agree with this statement personally?

        “I’ve just been on a training course run by a vat specialist from HMRC, specifically on international trade, and I was very clearly told foreign sales don’t count towards the limit for registration (that was the whole purpose of me attending the course, so I discussed it with the tutor).
        They confirmed that it’s even possible to have a multi-million pound turnover and not have to be vat registered, if sales to the UK are below the threshold (e.g. an export business).

        HMRC don’t monitor foreign sales at all, if you are not VAT registered. You should register in another country if your sales to that country exceed their registration limits, which vary from country to country (can be found on the HRMC website).

        However IF you are registered you have to include all sales in your VAT reports.”

      4. Andrew Minalto

        Hi Graham,

        I don’t really know answer to this but if it came from HMRC directly, it should be true.

        I have always been VAT registered locally first and only then abroad so I don’t know whatever it is true or not.

        Andrew

  26. Hi Andrew i’m in a bit of a pickle. I have exceeded the 85k turnover on ebay UK and reached about 98k in the period of 12 months. Should I reduce my sales to avoid registering for VAT ? I know for a fact my business won’t work if I have to register for VAT as it’s already highly competitive as it is. Ebay sent me emails saying I should provide a VAT number within 30 days to avoid them putting restrictions on my account (stopping me from listing items, followed by removing my listings) etc.

    1. Andrew Minalto

      Hi Anon,

      Take a look at this article:

      https://andrewminalto.com/vat-registration/

      Thanks,
      Andrew

  27. Hi Andrew I have a couple of questions. Is the annual turnover of based on a rolling 12 month period also if I go over the threshold and register for vat what would I do if I then fall below this unregister?

    1. Andrew Minalto

      Hi Joe,

      Yes, rolling last 12 month period.

      If you go below threshold you still stay VAT registered – nothing really changes.

      If you see that your turnover will stay below the VAT threshold, then you can de-register from VAT.

      Andrew

  28. I wonder if I can get some advice please. I have been a business seller on ebay for over 2 years. I buy goods from US to sell on ebay. I am currently needing to become VAT registered but im unsure what i need to do. I do have an accountant but he said I need to start putting my prices up 20% to show the VAT. If I put my prices up then I will no longer sell due to keeping prices same as other sellers. My business sells low profit items which means i will be selling at a loss. For an example. Item sold at £12.75 profit of £1.49 once fees postage etc has been taken off. I cannot claim VAT back as I buy from the US so no VAT shows on my invoices. Hope this makes sense.

    1. Andrew Minalto

      Hi Sharon,

      Please take a look at this article:

      https://andrewminalto.com/vat-registration/

      Thanks,
      Andrew

  29. Hi, Andrew!
    I’m from Bulgaria (EU), doing dropshipping from Amazon UK to eBay UK, started an year ago.
    Right now I really need a serious help from you.
    So, 2 days ago I received an e-mail from eBay UK:

    “You may need to take actions due to the upcoming changes in the UK Value Added Tax (VAT) rules. Depending on your items location and the size of your business you may need to register for VAT in the UK.

    Please take an action prior the new TAX rules are being in place as of spring, 2018.

    Please check your eBay business profile within the UK, and ensure that you have registered for VAT in the UK:

    • If you are located overseas and forward deploy inventory to the UK (your items are located in the UK).

    • If you post goods to the UK from another EU country and sale for £70,000 and more (approx. USD 99,700/EUR 80,000) a year.

    If you’re selling items to the UK or within the UK, and not compliant with the UK new tax rules, you will be stopped from selling on eBay site.”

    Would you help me with some details about that matter, please?
    Honestly, I’m totally unclear about how to register for VAT in the UK.
    I don’t have an UK address, a company or whatever.
    I already contacted HMRC via their webchat, but all I was told was to sign up and to follow the instructions.
    I explained that I’m actually doing a service between sellers and buyers and I don’t have items stored in UK. Then I was answered that once I register for VAT in the UK, 20% VAT will be applied to my commissions. That was all.
    But as long as I know, eBay already apply VAT to every single selling, monthly invoice, etc. So, does it mean that I have to be taxed with another 20% VAT, i.e. twice?
    Then, once I register for VAT in the UK, how will I render account to HMRC, which procedures do I need to follow, etc.?
    And when starting to register, which option to check? The person from the webchat of HMRC told me to choose “Organisation”, but I’m not sure why?

    As you can see, I’m totally confused and unclear about the VAT registering and that’s why I’m deeply count on your help here.
    Please, give me some important advice, help and all the information I need for that!
    The more detailed info and explanations, the better help and understanding by my side.

    Big thanks in advance!!!

    1. Andrew Minalto

      Hi Plamen,

      First of all – eBay is misleading people about this law – it’s not a NEW law! It’s already on place for several years and Amazon sellers for example are doing this for some time already. Right now you’re effectively already breaching the law.

      Secondly – doing accounts, VAT is not that simple if you have no knowledge in accounting. I highly recommend you consult with an accountant first to see if it’s actually profitable/viable for you to do this business model if you’re VAT registered and if it is – then you will most likely need to hire someone who can do accounting/VAT returns for you.

      You can register for VAT via mail, using a special form on the HMRC website.

      Then, you will have to do quarterly VAT returns – you can do this online, and pay VAT.

      All this information is on HMRC website – so start reading and learning how it all works!

      Andrew

  30. Hi Andrew,

    Many thanks for the information you give us!
    My situation is the following:
    I’m from Romania and now live in the UK, I want to start a business on ebay and I really need your advice to get started.
    I want to buy goods from Romanian manufacturers and bring them to the UK, put them in other boxes and sell them on ebay UK.
    I have a VAT-paying company in Romania, could I buy the goods through the company I own in Romania and then sell it on ebay in the UK (after I brought them to the UK and processed some packaging)?
    What options do I have?
    Do I have to register as Sole Trader and buy the products from Romania and then sell them to potential buyers on UK ebay? In this case, will I get an invoice from the Romanian producer that will include 19% VAT and I will sell without VAT to the UK buyer?
    If I register as Sole Trade what billing program do I have to use to issue bills to customers?
    I certainly will not reach this year’s threshold of £ 77k a year to register for VAT!
    Thank you so much in advance !

    Minel

    1. Andrew Minalto

      Hi Minel,

      You need to consult with an accountant on best way to set-up your business.

      I’m not qualified to give such cross-border VAT/accounting/tax advice, sorry.

      Thanks,
      Andrew

  31. Hi Andrew,

    Many thanks for the information, really appreciate it.

    My situation is the following
    A manufacturer in Spain would like to introduce their product in the UK market and I have offered to help (I live in UK).
    I would like to begin by selling at Amazon UK and it seems I have 3 options:
    1. Created my own distribution limited company in UK (Do i need to VAT register for this?)
    2. Be a sole trader
    3. Represent the Spanish company in UK (Spanish company would need to register for VAT in UK which would not be ideal)
    Which option would you say is the most VAT “saving” one?
    I don’t expect to surpass the VAT threshold in the next 12 month but I do intend to use Amazon’s FBA services just for UK.

    Any guidance would be much appreciated

    1. Andrew Minalto

      Hi Dan,

      I would register as a Sole Trader in the beginning and no, you don’t have to register for VAT from day one.

      You can also of course register an Ltd. company (without VAT) but it will just come with more complex accounting situation.

      Andrew

  32. Brijesh shah

    Hi Andrew,
    This is very informative post and thanks for this and replying everyone. I am thinking to register for VAT , do you sell or recommend any VAT return software?
    I sell mainly on eBay and my current turnover is 80000 pounds. I sell mainly general sales list medicine which class as pharmaceuticals and if i register for flat rate scheme I have to pay 8% VAT . Can eBay and amazon business register for flat rate VAT ? Please help. Many thanks,

    Brijesh

    1. Andrew Minalto

      Yes, eBay & Amazon businesses can register for flat rate VAT scheme.

      Accounting software wise, take a look at this one:

      https://www.xero.com/uk/

      Thanks,
      Andrew

  33. Hi Andrew

    I am new to eBay and I am confused as to whether I need to fill in the ‘VAT’ box with 20%?
    I earn no where near the VAT threshold, as I’ve only just begun. But eBay doesn’t really explain anything regarding this field.
    If you can shed any light on this I would be very grateful.

    1. Andrew Minalto

      Hi Matt,

      Thanks for your comment.

      No, you don’t have to do ANYTHING regarding VAT if you’re NOT VAT registered.

      Simply ignore VAT altogether.

      Thanks,
      Andrew

  34. Hi
    Do i stay away from VAT if i’m AmazonUK FBA seller? I’m from EU country. Turnover rate will be under £10k.
    I was told that if i don’t register for VAT, ill be charged 20% on my sale.

    1. Andrew Minalto

      If you’re from a EU country (not UK) AND use FBA warehouse in the UK to store your goods, you MUST register for VAT from day one.

      That’s law.

      There are no threshold rules in such situations – you have to register for UK VAT number from day your stock arrives in the UK.

      Thanks,
      Andrew

  35. Hi Andrew, Here is a copy of the email I received from eBay below, it is telling me I must register for VAT even as a small business seller that doesn’t tale more than £10k pa. So Unless I register for VAT I will have no way of getting this VAT returned? Please can you advise what to do as a small business seller? Is this the end of the line for small business sellers on ebay? As 20% will not leave anything left after all the sellers fees.

    Here is a copy of the email I received from eBay below,

    Changes at a glance

    ✓ From 1 Aug 2017, eBay sellers living in the UK will contract with eBay (UK) Limited instead of eBay Europe S.à r.l.
    ✓ The change affects a number of our agreements, including our User Agreement, User Privacy Notice and Billing Agreements.
    ✓ We currently charge UK VAT of 20% on seller fees for non-business sellers. This won’t change and you won’t see any changes in your overall fees.
    ✓ Beginning 1 Aug 2017 we’ll start adding UK VAT at the standard rate of 20% on fees billed to business sellers.
    ✓ Our net fees aren’t affected by this change. We’re not changing the services we provide, and you won’t need to update any of your listings.
    ✓ For example, if you’re a business seller billed on the 15th of the month, your invoice dated 15 Aug 2017 will show VAT on all your fees. However, you’ll also see a credit for any VAT applied to your fees between 16 July and 31 July.

    Are you registered for VAT with HMRC?

    ” IF THE ANSWER IS YES, YOU ARE VAT REGISTERED”

    You’ll begin paying 20% UK VAT to eBay (UK) Limited on taxable fees. You can claim an input tax credit if you’re entitled to deduct VAT. If so, it should not represent an additional cost to you. You should consult your tax adviser to find out how VAT applies to your eBay business.

    ” IF THE ANSWER IS NO, YOU ARE NOT VAT REGISTERED”

    You’ll begin paying 20% UK VAT to eBay (UK) Limited on taxable fees and won’t be able to reclaim VAT paid unless you register for VAT with HMRC. If you decide to register for VAT with HMRC, you’ll be able to deduct this VAT when you complete your VAT return. You should consult your tax adviser to find out how VAT applies to your eBay business.

    Thank you,
    Grant

    1. Andrew Minalto

      As explained before, nothing changes for people who are not VAT registered.

      And you DON’T have to register for VAT!

      Andrew

  36. As an eBay business seller of second hand goods I only earn about £7,000 pa net. If I get charged an extra 20% vat on top of eBay and PayPal fees, it’s hardly worth my working! What shall I do?

    1. Andrew Minalto

      If you have reached VAT threshold, there are only two options:

      1) Register for VAT;
      2) Reduce your sales to stay below the VAT threshold and registration.

      If you do register for VAT, check out this post:

      http://andrewminalto.com/vat-registration/

      Thanks,
      Andrew

      1. Hi Andrew, I think you miss understood the question from ‘deebo’ they were explaining they are no where near the threshold of £77k a year to register for VAT!

        But.. they were asking what should they do as a small business seller that only returns an annual income of £7,000 and now from 1st of August 2017 ebay will be adding 20% VAT to all there sales fees!

        The question is, unless this person registers for VAT they have no way of getting this extra 20% VAT back?

        Does this mean the small ebay business sellers are basically now out of business?

        Ebay are asking for all business sellers to now register for VAT! Unless they are just happy to lose the 20% charges that will be incurred from the 1st Aug 2017.

        Please can you help to advise as I am in a similar situation and this is a very important part of my income so I can survive.

        Thanks,
        Grant

      2. Andrew Minalto

        Hi Grant,

        As explained before – for non VAT payers, NOTHING changes after this change!!!

        You are already paying VAT on your fees right now, and will continue paying them after 1st August.

        eBay just changes it’s jurisdiction to the UK.

        Andrew

      3. Hidayat

        Hi, Andrew. I’m a bit confused too, because my ebay invoice is now showing fvf that work out to be 12% (10% usual fee + 20% of the 10% which is 2% of total, thus 12% fvf)

      4. Andrew Minalto

        Yes, this is correct.

        And I sincerely apologies for giving out wrong advice on this.

        I was under impression that eBay will keep fees structure same for ALL sellers but it turns out only PRIVATE/INDIVIDUAL sellers are kept under previous fees and all Business sellers now are charged UK VAT on fees. For VAT registered business sellers this won’t matter obviously but for non-VAT registered sellers, this means an increase of fees for 20%.

        Now eBay fees + PayPal fees are slightly above 15% together (same as Amazon).

        Once again – my apologies for reading this news update wrong.

        Andrew

  37. Hi, thanks for the info.

    I have a question regarding selling on Amazon and EBay.

    My Amazon turnover is around £75000 and I am a ltd company but to keep under the threshold could I sell on EBay as a sole trader and have it separate to the ltd company as I don’t want to register for Vat. Half of my items are baby/children’s clothes but I see that it still counts for registering for vat in turnover terms.

    Also if I took £100,000 sales and £50,000 of it was children’s clothes sales then how much vat would I pay?

    Thanks
    Sarah

    1. Andrew Minalto

      Hi Sarah,

      Thanks for your comment.

      I would recommend that you speak with your accountant about this, as there could be ways for you to avoid VAT registration by setting up two companies. But you’ll need to speak with an accountant about this.

      Thanks,
      Andrew

  38. Hi Andrew,

    From the 1st August 2017 Ebay will start to automatically start charging VAT on fees for registered business sellers.

    Now my question to you is that does this mean we will have to increase our product prices by 20%?

    I’m very confused with how this is going to effect us.

    I hope you can shed some light on this.

    1. Andrew Minalto

      Hi Bobby,

      No, you won’t.

      If you’re not VAT registered right now, nothing changes for you after 1st August.

      if you’re VAT registered, eBay will indeed charge you VAT on fees because they will start using UK VAT number. But this is VAT paid expenses of course which you’ll offset in your VAT return against VAT on sales.

      So nothing really changes, just small accounting formality.

      Thanks,
      Andrew

      1. Hi Andrew,

        Thank you.

      2. Andrew Minalto

        You’re welcome Bobby!

  39. Hi Andrew

    Great Blog,

    My partner and I have a Ebay business which we are trying to grow but keep below the VAT Threshold (now £85000 in 2017)

    I have a question relating to the turnover threshold limit, HMRC states that the turnover should be calculated by adding together the total value of your UK sales that aren’t VAT exempt.

    About 25% of our sales are exports, probably 10% to EU and 15% to the rest of the world. Do I need to include these sales when working out the turnover or should they be considered UK sales as they are sold through ebay.co.uk?

    I have been through most of the responses hear and I don’t think this has been answered anywhere.

    Many Thanks
    Richard

    1. Andrew Minalto

      Hi Richard,

      Thanks for your comment.

      There’s a live VAT WEB chat line on HMRC website where you can ask directly such specific questions:

      https://www.gov.uk/government/organisations/hm-revenue-customs/contact/vat-online-services-helpdesk

      I have used it several times and found it very quick & helpful! 🙂

      Thanks,
      Andrew

      1. Richard

        Thank you,

        The VAT Web chat gave a quick response saying that as most of the items I sell are to individuals then these sales would be seen as taxable, so all would be included in the turnover.

      2. Andrew Minalto

        And that’s correct 🙂

  40. Hi Andrew,
    I am Portuguese (living in Portugal), self employed and VAT registered. I can make intracommunitary (EU) transactions.
    I’d like to sell some items on eBay (e.g. UK eBay) but make those items available to all Euro Zone countries.
    This VAT thing is all very confusing to me as I’m new to this. Here’s the thing:
    I am able to buy those items to have in stock without paying VAT (being VAT registered) which makes them considerably cheaper of course.
    Now.. what do I have to do to sell on eBay to every Eurozone country (UK included) and have competitive prices? I estimate I would be making less than 100€/month. Can I be a private seller? Must I be a business? what must I consider when making my listings… what are my rights and obligations?
    Thank you so much in advance.

    1. Andrew Minalto

      Hi Nuno,

      Thanks for your comment.

      Yes, you’ll need to have a Business account on eBay, provide your VAT number and charge VAT on your sales to UK and other EU buyers.

      If you sell to another VAT registered business in EU (but outside Portugal), you won’t charge VAT them, if they provide you with a VAT number.

      Thanks,
      Andrew

      1. Thank you so much, now it all makes sense 🙂

      2. Andrew Minalto

        You’re welcome! 🙂

  41. Helo Andrew, I’m selling on eBay with business account around 1 1/2 year,in this period I make around £10,000 pound, but I don have vat number. I’m working in kitchen- kitchen assistant. You think I need to register it to government pay eBay taxes? and I hope I don’t have any problems in future because I still don’t pay ebay tax to Government?
    Thank you Paul

    1. Andrew Minalto

      Hi Paul,

      Thanks for your comment.

      You don’t have to register for VAT, no.

      BUT you have to register as a sole trader and declare this business, yes. Please check this guide for more information:

      http://andrewminalto.com/ebay-tax-registration/

      Thanks,
      Andrew

      1. Thank you for your reply!

        OMG, I check your information what you post, but I’m scared because after nearly 2 years I will have huge penalties-I think.

        But I don’t understand if I’m working like a full time plus I have eBay shop how they charge my?in my current job my Manager told me I can’t be self employed.

        Thank you Paul

      2. Andrew Minalto

        You’ll need to get in touch with HMRC and sort this out with them – I’m sorry but I can’t help you to sort out your tax issues.

        Andrew

  42. Hi Andrew
    Love all your work and articles by the way.
    I was recently trying to work out how a successful ebay seller was able to charge such low prices, when I noticed all their listings have the included VAT set at 0.2%! Am I missing something here, surely they HAVE to charge 20% VAT to UK buyers don’t they? If they are claiming all their VAT back from their wholesale purchases but only passing on 0.2% to HMRC, no wonder they can set their prices low! They are a UK-based business seller with a VAT Reg number on their listings.
    Thanks

    1. Andrew Minalto

      Hi David,

      I’m sure it was just a typo…?

      As no one can charge a 0.2% VAT

      Andrew

      1. I’m not so sure. It says 0.2% on all their listings (hundreds of them) and that includes GTC listings that are over a year old and newly listed ones.
        I’ve seen another seller where all the listings state VAT as being 2.89% !

        Would it not be possible for a seller to [fraudulently] increase their margins by only passing small amounts of VAT onto HMRC, as all their invoices that they keep for their tax records will just show the actual amount of VAT paid by the buyer won’t they? (eg. their record for an item they sold for £10 will just show that a buyer paid 2 pence, if their listing is set at 0.2%)

      2. Andrew Minalto

        I don’t know really, haven’t looked into such fraud schemes…

        To me it all looks totally illegal and basically screams for big problems if someone reports them to HMRC.

  43. Hi Andrew,

    My situation is very complicated.

    I am a dropshipping on Ebay, and FBA seller on Amazon. However, I am not a UK resident.
    I registered my company in Ireland, but most of my sales and trading are in the UK.

    As I was registering with Amazon UK. it required me to register for the UK Vat because I am not a UK resident. so now, I have UK flat rate 7% scheme for my amazon business. Therefore, I will have to pay HMRC 7% of my total Amazon sales. but I am fine with that, because my sales on Amazon are around 30%+

    However… on my ebay dropshipping model. as you know, it needs to be competitive in pricing. Therefore, most of my profit margins is around 7-15% which are all quite low in profit. so, if I have to pay for the vat, I will totally lose all my profits, and turn to big losses straight away.

    but the tricky part is, my ebay and paypal are both registered in Ireland, which I dont know if its obliged to pay for the VAT in UK as well? even though most of the items listed are in the UK.

    I contacted Ebay Ireland before, regarding to this issue, and they told me not to worry about the UK Vat since, I am a resident in Ireland…. However, after spoken to my new accountant today. They told me that every sales that are made in the UK (bought and sold) will be subjected to the HMRC VAT.

    If you can help me clarify on this issues. Will be extremely helpful

    Much loves,
    Peter

    1. ANGELA MULLIGAN

      Hi Peter, just curious how you got on with your issue. I’m Irish and just starting an Amazon Private Label FBA business and wondering if I should form my limited company in UK with a UK bank acccount and register for VAT there or form an irish Ltd company and bank account (intend to sell on all Amazon Europe platforms)…. any advice would be great… thanks Angela

      1. Andrew Minalto

        Hi Angela,

        You don’t need a UK company, no.

        You can set up a company in Ireland and then apply for VAT number in the UK and other EU countries (if needed).

        Thanks,
        Andrew

    2. Andrew Minalto

      Hi Peter,

      Thanks for your comment.

      You should listed to what your account says, really – I’m not qualified to give such advice on accounting issues.

      I outsource all my accounting and relay on my accountant professionalism.

      Andrew

  44. Hi Andrew,

    I’m currently dropshipping as a private eBay seller. I’m worried of registering my eBay account as business. As I want to avoid getting charged vat on my sale or eBay/PayPal fees. I’m not vat registered so I upgrade my eBay account to business seller then does eBay start charging me vat on my sales and ebay/PayPal fees?

    *I’m a UK resident.

    Thank you
    Lubna

    1. Andrew Minalto

      No, eBay won’t ask you for VAT number when you upgrade to Business account.

      VAT number is optional on eBay.

      Andrew

      1. Thank you Andrew for your prompt responses on matters on VAT on eBay sales. I am also currently selling on eBay as a business registered. But i discover that i am been charge VAT on every sales i made. i have contacted eBay but i have not got any answers to why i am been taxed. the tax applies to both sales and shipping and at the shipping point i pay VAT on every item i shipped and yet ebay tax me on both sales and shipping. please i do i go around it. thank you

      2. Andrew Minalto

        have you given your VAT number to eBay?

  45. There is no doubt you have a good information but to me you have done some mistakes in calculations. According to you….

    QUOTE:

    For example:

    * You buy £1000 + VAT worth of goods in one month (£1200 in total). VAT paid – £200.
    * Your other VAT reclaimable expenses for that month (packaging materials, fees etc.) are £240, so VAT part – £40.

    So your total VAT for purchases for that month was £240.

    Now let’s have a look at your sales:

    * You sold all those items for £3000, VAT included.

    * This means you took in from sales £500 in VAT.

    In your VAT return it would look something like this:

    VAT from sales (£500) MINUS VAT from purchases (£240) = £260

    This means you would have to pay the government £260 pounds in tax for the last month of trading.

    UN-QUOTE

    First thing, according the 20% VAT, on £3000.00 the VAT will be £600.00 and not £500.00

    Therefore, according to your calculation, it should be £360.00 that you have to pay to the government.

    Secondly, this amount is actually £120.00 that you may have to pay extra if you are VAT registered because you’re going to claim VAT on your purchases anyways. So if you purchase items (VAT=£240.00) and claim the VAT (VAT=£240.00) but pay to the government on your sales, it’ll be £360.00, therefore, you actually pay £120.00 extra to the government and your profit will be minimise.

    However, if you are not VAT registered then you’ll have to pay £240.00 which you cannot claim. In that case you are paying double of your amount (i.e. £120.00 X 2 = £240.00) so how can this will give you any benefit if you are not VAT registered?

    To me, if you have a VAT registered business it may cost you more in many other ways, e.g. to maintain books, accounts, audits, hiring more staff to keep track of each sale or using accounts systems or paying to the accountant etc. Therefore, until your business is not earning with a regular amount of over the threshold, it should not be registered as a VAT because you might need to increase the prices to get more profit. Other than that I don’t think it may effect on your income in a straightforward way of claiming VAT.

    Well, you might know any other deeper point what I have said, hopefully you’ll rectify me or your own conclusion.

    1. Andrew Minalto

      Hi Sheraz,

      I’m sorry but your calculations are not correct.

      1) On £3000 sales, VAT IS £500 (£2500 + 20% on top is £3000). You do not calculate 20% from £3000 (your £600 figure), that’s not how VAT math works. There’s cost of goods + VAT charge. Goods is £2500 and VAT from £2500 @ 20% is £500.

      2) So it still stands at £500 – £240 = £260.

      But you’re right that I have not taken into account amount I can reclaim here. So effectively I would pay £20 in VAT (£260 – £240).

      So £20 MORE than without being VAT registered.

      Plus all the hassle with accounting, VAT returns etc.

      Andrew

  46. Richard Bromley

    Hi Andrew, great website. Please can you help me with an ebay/vat problem. We are a long established small business (vat registered) but have just started selling on ebay. I’ve registered a business account on ebay with our vat number but my problem is with the postage charge. Because of the benefits ebay give for offering free postage, we are doing this but obviously we have to pay seperately our carrier charge which is £8 +vat per delivery. We reclaim the vat on this in our expenses, but the problem is every sale we make has the £8 cost to us of the postage built into it (because we’re offering free postage) so does this mean we will be paying vat on the postage twice and need to deduct £8 for each sale from our “gross income before vat”? This is how I am seeing it, but i’m not sure if i’m right.
    Thankyou for any help,
    Richard.

    1. Andrew Minalto

      Hi Richard,

      Thanks for your comment.

      For questions like these, I really recommend you speak with your accountant as they will give you best advice (I’m not a qualified accountant).

      But in essence what you say is correct, unless you create your own invoices @ your end where you show shipping cost separately.

      Thanks,
      Andrew

  47. Hello all
    The Threshold for distance selling is 70k and I think EBay selling would fall into that category. Am I correct?
    https://www.gov.uk/vat-registration-thresholds

    1. Andrew Minalto

      No, that £70k threshold applies from companies OUTSIDE UK that sell to UK market.

      VAT threshold for UK based businesses is £83k.

      Thanks,
      Andrew

  48. Thanks ! I did work this out myself when I learnt what the threshold was, but you’ve cleared up a few nagging doubts. Why can’t eBay.co.uk or .com just say this, I bet loads of people have done this by accident. Josh

  49. We’ve started working with a accountancy firm that help us manage our VAT and limited company accounts but its definitely a minefield. Becomes hard to manage for sure, but their software has helped us. http://falconaccountancyservices.co.uk/limited-company-accounts-made-easy/

  50. Hi Andrew,

    Do eBay not charge the VAT on your monthly fees?how do I find out if I’m registered for VAT? Forgive me I have an eBay account for a long time but this will be the first time I’ve used it to sell anything

    Many thanks

    1. Andrew Minalto

      eBay won’t charge VAT on your fees IF you’re VAT registered and provided your VAT number to eBay.

      You can read more about VAT & eBay here:

      http://sellercentre.ebay.co.uk/about-vat

      Thanks,
      Andrew

      1. Daithi

        Thanks for the reply Andrew,so it’s just vat on the fees?
        I though it was vat on the final price you sell for.

      2. Andrew Minalto

        No, just on the fees.

        Andrew

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