Wholesalers and large businesses selling on eBay UK are now obligated to pay the 20% rate of value added tax (VAT), following rule changes by the UK government and eBay UK itself.
eBay UK has changed its policy to ensure that all British traders earning under the £85,000 per annum threshold must now be VAT registered to trade on the site. This change comes as a result of internal restructuring, with the site’s point of sale switching from Luxembourg to the UK.
A recent government edict meanwhile has given the tax authority HMRC the power to enforce VAT liability for overseas companies. Non-compliance can result in platforms including eBay becoming liable for the VAT charges of the overseas businesses they are hosting.
These changes will not affect private sellers or business sellers earning over £85,000, who are already liable for VAT. It will also not affect those businesses who were already VAT registered, and who are generally able to claim the costs of VAT back as a tax credit.
Businesses exporting goods from abroad to UK customers will still not be charged for VAT through eBay UK. This includes both EU based businesses (excluding the UK and Luxembourg) and non-EU businesses.
However, you will be liable for any charges that you are required to pay locally, including local VAT, reverse charge VAT or GST. Businesses storing products in a country other than the home of their business are also required to register for VAT in that country.
If HMRC suspects that you are not paying a tax you are liable for, they can now issue a warning to you directly, after which you will have 30 days to comply. If you fail to do so, the platform holder will be liable, forcing them to close or otherwise limit the foreign account.
Businesses that are selling digital products or services through eBay and other platforms, such as digital downloads or redeemable vouchers, remain liable for VAT at the point of service. This means that regardless of where your business is based, you must pay (and optionally apply) a charge equal to the rate of VAT local to the customer.
For more information on the new rulings, the ways VAT might affect your online business, or any other tax and financial advice, feel free to get in touch.