Online marketplace eBay has recently introduced controversial new rules that will see VAT charged through fees on each sale made on the website.
The move comes after the Government revealed that the UK treasury was losing up to £1 billion a year because of fraud or errors by online traders.
In a message to sellers, eBay said: “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 HM Revenue & Customs (HRMC).”
This means that thousands of online stall holders that are not registered for VAT will be unable to reclaim the 20 per cent VAT charge unless they register.
Businesses earning over the current VAT threshold of £85,000 of revenue per year will already be registered, but others may opt in if they think their business will benefit from the new rules.
Following its announcement on the website eBay put out a statement, which said:
“We will continue to work closely with HMRC to ensure that all sellers on our platform comply with the law.
“In 2016, we began the process of realigning our legal structure, following the spin-off of PayPal, to better reflect how we manage and operate our platforms. Now, in 2017, we are changing the contracting entity for eBay users located in the UK.”
“eBay’s net prices will not change as a result of this contracting party change. There will be no change to our service as a result of this change, and sellers will not need to make any updates to listings.”
The success of eBay has seen a number of small businesses spring up as exclusive traders on the site. Up until now the VAT rules have largely not affected them, but many may now be considering registering for VAT.
At UK VAT Advice we have years of experience helping businesses register for VAT and deal with the compliance and recording implications of being registered. To find out how we can help your business with its VAT requirements or to learn whether your business would benefit from being VAT registered, please speak to us.