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E Retailers - Do you want to avoid substantial VAT costs

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The VAT People - Expert Author

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1st August 2014

Ebay, Amazon and online shops have grown at a phenomenal rate in the last few years with new start up businesses often rapidly exceeding the VAT registration threshold. Whilst it is great that the internet allows people to start a business with low overheads as they often don't have physical premises, it does have some downsides. The main one being that many online retailers misunderstand how they are expected to account for VAT by HMRC, especially those who rely on 'advice' gleaned' via online forums.

Here at The VAT People we have noticed two developing trends;

1. Many e-sellers do not understand how UK VAT works and assume that their turnover is based on the sales price paid by UK customers only less fees charged by ebay/Amazon and paypal. In general this is not the case and applying late to register can result in penalties of up to 100% of the VAT due plus a loss of profit achieved on sales which becomes lost as VAT to HMRC.

2. Business that sell to consumers in other EC member states are unaware that there is an obligation to register for VAT under the distance sales rules and account for VAT if the sales exceed certain thresholds in the country where the customer is based. This can lead to substantial VAT arrears and some EC country's apply eye wateringly high late registration and late submission penalties that may exceed the VAT due in their country. In addition, the countries can then ask HMRC to collect the debt on their behalf.

Of course all these problems can be avoided by being prepared and understanding how to account for VAT and what trade facilitation measures are available to reduce its impact. If you or your clients sell goods online either via a website such as ebay or Amazon, or via their own online retail store, and have not already sought VAT advice, now is the time to do so. Please contact our fee VAT Helpline for an initial discussion to identify if you or your client has a VAT exposure or needs advice to avoid creating one.


About the Author

The VAT People are leading VAT and Customs Duty consultants based in the North West of England. We work with a wide range of businesses throughout the UK as well as assisting our accountancy colleagues to unravel the thorny VAT issues for their clients. We are one of the UK's largest and most comprehensive sources of VAT and Customs advice, our consultancy team having over 140 years of experience in VAT and Customs gained in either HMRC or a Big 4 accountancy practice environment.

Call us on our VAT helpline 0800 077 4604 to discuss. All initial discussions are free with no-obligation.



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Article Published/Sorted/Amended on Scopulus 2014-09-08 09:03:08 in Tax Articles

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