Many e-commerce entrepreneurs use eBay, either as a proving ground for new products or as their central store. The myriad of fees associated with eBay can be challenging enough for a business owner, but do you pay VAT on eBay fees?
As you know, you become liable to pay VAT when you either voluntarily register for VAT or when you reach the VAT threshold (£85,000 in 2020). Once registered, you must account for VAT on all relevant transactions or risk penalties.
Business eBay account
If you are purchasing goods with the intent to resell, then you must register for a business eBay account. During the sign-up process, you will be prompted to enter your business’ VAT number if you are registered, even if you are selling goods that are VAT exempt.
If your e-commerce business isn’t VAT registered when you create your eBay account but you later register for VAT, you must ensure you update your business profile once you receive a VAT number.
Do you pay VAT on eBay fees?
Yes. As a UK-based e-commerce business on eBay, you must pay VAT on eBay fees of 20% if you are VAT registered. The VAT can be added to your VAT claim when you complete your quarterly return.
Do you pay VAT on eBay sales?
Yes. As you are aware, eBay is most prominently a place for B2C and C2C transactions. As such, most customers will not be VAT registered, which means you must include VAT in all your pricing, as you will not be able to add it on afterwards and will still have to pay the amount due.
The amount of VAT charged is in line with standard VAT legislation, with most e-commerce products falling under the 20% bracket. Sports good are exempt, however, and children’s clothes (another e-commerce favourite) are listed at 0%. If you are unsure which tax bracket your e-commerce products fall under, please read this guidance and/or speak to a qualified e-commerce accountant.
Income Tax on eBay Sales
By law, eBay sellers must also declare and pay income tax on income earned from eBay sales. If this is done outside of the scope of your business, for example, because you were testing out a business idea but hadn’t formally created a business, you will need to adjust for this when you submit your tax return. If your sales were completed as part of the activities of your e-commerce business, you will include all relevant sales when you submit your tax return if you are a sole trader.
Complete Guide to VAT
If you are struggling with a VAT issue or are unsure on the VAT position on any other fees your e-commerce business incurs, check out our Complete Guide to VAT.
If you are unsure on the VAT rate for your e-commerce goods or need some assistance to complete your VAT returns, get in touch with our team of e-commerce specialist accountants. They can advise you on the best course of action and help you to grow your store to its full potential.
The best time to act is now.