eBay to force all UK traders to pay VAT

eBay traders will be forced to pay VAT on all purchases under new corporate structure rules to be launched later this year.

Prompting the move, the online marketplace has been under attack from the Government after it emerged that the UK is losing up to £1 billion a year because of fraud or errors by online traders.

It will largely affect businesses that use eBay but are not VAT registered.

“You’ll begin paying 20 per cent UK VAT to eBay (UK) Limited on taxable fees and won’t be able to reclaim VAT paid unless you register for VAT with HMRC,” said eBay in a message to customers earlier this week.

It means that thousands of businesses will be unable to reclaim the 20 per cent VAT charge unless they register for VAT.

The current VAT threshold – the revenue at which businesses must legally be VAT registered – is £85,000, but businesses can opt in before exceeding the threshold.

In a statement, eBay 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.”

Businesses who are VAT registered will be able to claim a tax credit that will offset the VAT they paid, unless they are using the simplified “flat rate” VAT scheme.