VAT on Amazon Fees - Accountant Reccommendations please

#1

I have read a few threads on this forum and there is still ambiguity as to whether VAT is paid on the full amount including Amazon Fees or whether VAT should be paid excluding Amazon Fees . I realise this is not clear cut as even ringing up HMRC myself they were unable to give me a true definitive answer.

I can see there are many of you taking advice from your accountants to pay VAT AFTER all fees have been deducted as this is the amount that was deposited into your bank and the amount you have been advised to collect tax on.

I am reaching out to these sellers and hope you will be kind enough to drop me a message either by reply or by private message as to the name of your accountant as I am in the process of switching and would really like to take advice from an accountant who has already looked into this and understands the whole Amazon EU Luxembourg system as I am unable to find an accountant that has any knowledge of Amazon.

(I have advised Amazon of my VAT number incase any of you ask this)

Thank you

Edited by: Mrs Johnny Depp on May 7, 2015 3:30 PM

Edited by: Mrs Johnny Depp on May 7, 2015 3:33 PM

#2

There is no ambiguity on this at all. Your responsibility if you are VAT registered as a seller is to collect VAT based on the total amount paid by the buyer.

#3

The buyer is paying the VAT, not you (you are just collecting it and then handing it over).

Remember that and then it is clear the the VAT is paid on the amount the customer has paid. The Amazon fees are no more relevant than the cost of your packaging.

Caroline

#4

This is the part my accountant and also the chap I spoke to at HMRC are not entirely sure about hence why I am asking these questions as I’m also unclear.

What they are saying is… As Amazon collects the full payment from the customer then deposit the balance less their fees to the seller, the ambiguous argument is that Amazon is responsible for the VAT on the fees as the seller never received this part of the money so how can the seller be responsible for collecting VAT on money they never received?

HMRC said they get asked this question all the time.

#5

If you are using any kind of payment processing system you don’t receive the full cash: whether that be Amazon, Paypal or some sort of third party credit card processor. They are simply deducting their fees at source rather than billing you and waiting for you to pay them. As others have said the VAT is due on the full amount paid by the customer.

#6

VAT on Amazon fees has nothing to do with the VAT collected on the sale by the seller. Your fees on the sale are expenses, nothing else. The seller sets the sale price, that is why they are responsible for accounting for the VAT paid by the buyer. Amazon is a third party marketplace and collects no VAT from the sale at all.

#7

I’m in agreement with Crimso - its straightforward when you think about it.

Think of it a different way - instead of Amazon taking their fees automatically from the sale, if they were to invoice us at the end of each month. Its the same end result buy might make it easier to understand?. Either way, Amazon receive the same amount of fees and the buyer has paid the same amount of VAT (which we then hand over to HMRC).

To use my earlier example, if you deduct the fees before calculating VAT. it would be like saying the buyer bought it for 10.00 but it cost me 2.00 to post it so i’m only going to calculate VAT on the 8.00!

Lovely as that would be, it doesn’t work like that. It’s just that the order of things is switched about with Amazon in that they take the fees before handing over the payment instead of us paying it later - it makes no difference either way to what the customer has paid in VAT.

Caroline

#8

> If you are using any kind of payment processing system you don’t receive the full cash: whether that be Amazon, Paypal or some sort of third party credit card processor. They are simply deducting their fees at source rather than billing you and waiting for you to pay them. As others have said the VAT is due on the full amount paid by the customer.

Not all third party credit card processors deduct fees at source. The one we use pays us in full for each transaction, then invoices us at the end of the month for the fees

#9

Surely you are claiming the VAT back on the fees anyway? so it makes no difference which way really.

Personally I agree with the OP in principle but surely this is something you are paying your accountant to actually know?? time to change accountants maybe?

#10

If you’ve registered your VAT number with amazon you won’t have been charged VAT, so it does make a difference. VAT is a consumer tax, if you do it the ops way you are under declaring a sale and not handing over the correct amount of VAT that a customer has paid.

As a business if we purchase something from a marketplace seller we ask them for a VAT invoice, I would be unimpressed with any seller that gave me a VAT invoice with VAT that wasn’t calculated on the full amount I paid

#11

+As a business if we purchase something from a marketplace seller we ask them for a VAT invoice, I would be unimpressed with any seller that gave me a VAT invoice with VAT that wasn’t calculated on the full amount I paid+

Fully agree. HMRC would be less than impressed that the seller was under-declaring VAT actually collected on the sale as well.

#12

The simple decision tree for VAT Registered Business to Customer orders is as follows:

VAT is assessed at the point the customer pays

Q1 Is the delivery address within the EU?

No = No VAT
Yes = Go to Question 2

Q2 Is any part of the order subject to VAT?

No = No VAT
Yes = VAT is accounted for on the whole amount of the Vat-able elements of the order which include items subject to VAT plus shipping if charged, ie what the customer has paid you.

The total amount of VAT for the order goes into the “VAT Collected” column

There is another column “VAT i have paid” column, which may contain, but not limited to:

VAT paid to Royal Mail and/or courier
VAT paid to Supplier of goods
VAT paid to Supplier of packaging
VAT paid on all other invoices that your business gets.

At the end of each quarter, you take the total of “VAT i have paid” from the “VAT Collected” and send this to HMRC, or they refund you if its a negative figure.

This only deals with VAT, all other costs, including Amazon/payment fees form part of the larger Business accounting process.

Looking at the OP scenario, it seems that people are looking at paying VAT on the Amazon Disbursement only (post Amazon fees deduction), which is incorrect, but that amount may also include monies for Non Vat-able items.

Edited by: Inspirations Gift Shop (UK) on May 9, 2015 1:42 PM

#13

I had a painful VAT audit on this issue in September 2012 and was landed with an eye watering 6 figure arrears bill because of it. HMRC are very clear that VAT is payable on the Total amount of the sale (NOT the amount disbursed), and the Amazon fees are basically treated as a zero Rated “purchase”/expense. This also goes for sales on Amazon FR, DE, IT and ES

#14

“Surely you are claiming the VAT back on the fees anyway? so it makes no difference which way really”

This is incorrect. There is no VAT to claim back in the fees. As I found out to my cost

#15

Thanks for confirming what has already been stated several times on this thread. VAT is collected on the Total Amount of the Sale and handed over to HMRC on that basis. Expenses and business supply costs can not be used to reduce the amount that needs to be handed over to HMRC by a VAT registered seller. Sorry that you found out in the way you did. Any accountants that suggest VAT is only collected on the amount after Amazon fees have been taken off the sale are giving advice that is both incorrect and illegal. Despite what the OP has suggested there is no ambiguity at all.

#16

Perhaps the neggers could tell me why I am being unhelpful by stating factually correct advice?

#17

Whilst I get the gist of what you are saying and agree with it the above bit isn’t correct. Sellers are able to reclaim VAT on business expenses which has the effect of reducing the VAT that they pay over to HMRC, unless they are on the flat rate scheme of course.

#18

Don’t disagree with you on that. But, you know, just suggesting a possible reason why someone may have negged you. Obviously I’m not a mind reader so don’t know the real reasons but you asked for any inaccuracies to be pointed out

#19

The amount they are entitled to reclaim from paying VAT on fees doesn’t affect the amount they collect on the sale itself though. Any accountant who tells someone that they reduce the amount of VAT collected on a sale by deducting the fees paid over to Amazon is wrong.

#20

Thanks for offering your possible reasons, I was after the actual neggers though…wishful thinking on my part!