The short answer to this question is: yes, UK eCommerce businesses selling on eBay are required to pay VAT on selling fees if they are VAT-registered. However, as with most things in the world of tax, there is a longer explanation too and that’s what we’re going to explore in this article.
We’ll cover the following ground to help you understand what VAT needs to be paid on which eBay selling fees:
• The various types of eBay fees.
• At what point a business is required to register for VAT.
• The fees that incur the standard 20% VAT.
• The zero-rated fees that incur 0% VAT.
• What zero-rated VAT means.
• Why the support of a specialist eCommerce accountant can help manage your eBay business.
The different types of eBay fees and their VAT requirements
As an eCommerce business in the UK, if you choose to sell your product(s) on eBay, you are required to pay a number of different selling fees.
You will need to pay VAT on these fees once your taxable turnover reaches the current VAT threshold – at the moment, this threshold is set at £85,000 – or if you voluntarily register for VAT.
(After registering for VAT, you’ll receive a VAT number which you must enter into your eBay account information.)
But what is the VAT rate on these eBay selling fees?
eBay fees incurring 20% VAT
As we covered above, there are a number of different types of eBay selling fees and for the most part, they incur the standard 20% VAT for UK sellers using eBay Managed Payments.
Let’s break this list of fees down:
Listing fees – The fee you’re required to pay when your monthly allowance of free listed items has been used up.
Final value fees – This is 12.8% of the total sale amount (including product price, postage and taxes), as well as a fixed charge of 30p for each order.
Optional listing upgrade fees – There are various options available for eBay sellers to upgrade their listings, including adding a ‘Buy It Now’ value, double category listings, International Site Visibility and Reserve Prices. However, these upgrades come at a cost – plus VAT.
Basic eBay Shop fees – eBay sellers can pay £19.99 a month to get an additional 100 free monthly listings on top of the standard 1,000 – complete with the Special Duration upgrade. After that, the fee for each item listing is 35p.
Dispute fees – As part of its policies, if any disputes are raised on sales, eBay charges the seller £16.80 per dispute.
International sale fees – If a sale is made from a UK-based eBay business and the shipping address is in another country, an international sale fee will be incurred.
Seller currency conversion charge – If an eBay seller lists items on an international eBay site, eBay charges a 2.5% fee if any currency needs to be converted in order to fulfil the sale between customer and vendor.
Zero-rated eBay fees
Although a majority of eBay selling fees incur the standard 20% VAT, there are a couple of zero-rated fees that don’t incur any VAT at all (0%).
What does zero-rated VAT mean?
When an item is zero-rated, it means that although they’re still eligible for VAT, the VAT charged to customers is 0%. Where eBay selling fees are concerned, this covers postage services.
Examples of zero-rated eBay fees are:
• Packlink fees (the platform that powers eBay Delivery)
If you’re feeling unsure about anything to do with eBay seller VAT, we’d always recommend speaking to an accountant who is well-qualified to give you the right guidance.
Below, we share just some of the reasons why hiring a specialist eCommerce accountant, in particular, would be so advantageous to your eBay business.
The benefits of hiring an eCommerce accountant to help with your eBay business
Working with any accountant is a great way to navigate the complexities of finance and tax with more ease but you can take this one step further by hiring the expertise of an accountant who specialises in eCommerce businesses.
The benefits of working with an eCommerce accountant:
• They understand your industry and business model, so know how best to advise you.
• They’ll be able to ensure that your business remains tax-efficient (and compliant) at all times.
• They’ll be familiar with the eBay platform and what this means for things like fees and VAT.
• They know how to create, interpret and manage your VAT Return, as well as help you understand your full eBay VAT liabilities.
• They’ll simplify the process of selling across multiple marketplaces.
• They’ll be able to recommend the best online accounting software for eCommerce businesses like yours.