eBay VAT Invoice

Taxes are the lifeblood of any government, the money you pay in taxes goes to many places. Aside from paying salaries of government workers it helps the economy to remain strong and also help raise the standard of living. VAT is charged on most goods and services that VAT registered businesses provide in the UK.

If you’re an eBay seller and new to Vat invoices, we’ll cover a few basic facts about it and what it is for sellers like you. We’ll also show you how to collect domestic and international payments for free using Wise multi-currency account.

What is a VAT?

Value Added Tax (VAT) is charged on things like business sales, sales of business assets, commissions, and other taxable supplies. There are three rates of VAT, standard 20%, reduced at 5%, and zero 0% rated, there are also goods and services which are VAT exempt. If you’re unsure if this applies to you as an eBay seller you can ask your tax advisor, or your local tax office.¹

When you are registered for VAT, you charge your customers VAT on the taxable goods and services you supply. You pay VAT as output tax to HMRC, at the same time you can reclaim the VAT you paid as input tax for your business.

What is a VAT invoice for sellers?

VAT invoice or sales invoice is the document you issue to your buyers and it shows all the details of taxable supply and all related information prescribed by law. Only VAT-registered business can issue VAT invoices, there are financial penalties for unauthorized issue of VAT invoices.² If you receive an invoice from an unauthorized person, you cannot reclaim the VAT shown on it.

For UK sellers, doing business on eBay requires you to pay VAT if your items are allowed on international postage, you actively list on eBay, you hold stocks and deliver items from a location outside the UK, and you supply your items to private individuals. For domestic sales that exceeds the VAT threshold of £85,000 over the past 12 months, and then you must also register for VAT.³

VAT can affect your business on eBay in two ways; you may be required to charge VAT on the sales you make on eBay and you may need to pay VAT on your eBay fees.

You may issue simplified invoices for sales of £250 or less, this invoice only needs to show the following; your name and address, your VAT registration number, the time of supply and short description of the goods or services, the total price including VAT and the VAT rate applicable to each item.

To help you work out the VAT for your invoices, try our VAT calculator, and to work out the final profit on your ebay sales, use our eBay fee calculator.

What are my obligations as a VAT registered business?

VAT registered business also known as “taxable person”, has responsibilities and obligations, you must charge VAT on goods and services; may reclaim any VAT you’ve paid on business related goods or services. Aside from that, when issuing a sales invoice you must also keep records of it, and pay correct taxes on time. You can keep digital records and use software to submit VAT returns which is usually due every 3 months. You can also appoint an agent to deal with HMRC on your behalf.⁴

Aside from issuing valid invoices, VAT registered businesses also need to keep additional records such as sales records and purchases, a VAT account, and VAT invoices. You use these records to complete your VAT Return and pay any VAT due on time. It is also important to back up your records on your computer to avoid problems, for VAT purposes all your business records need to be kept for at least six years.

Do I need to register for VAT?

If you’re a seller on eBay and your VAT taxable turnover is more than £85,000 which is the tax threshold, then you must register for VAT with HM Revenue and Customs (HMRC). You can reclaim the VAT you’ve paid on certain purchases made before you registered.⁵

While waiting for your VAT number, you cannot charge or show VAT on your invoices, however you still have to pay the VAT to HMRC on this period. You can increase your prices once you have your VAT number and you can reissue invoices showing the VAT for them to understand the reason for the price increase.

How to register your business for VAT?

To register your business for VAT on HMRC, you can do it online, it also applies to partnerships and groups of companies registering under one VAT number. By doing this you’ll register for VAT and create a VAT online account also known as Government Gateway account which you’ll need to submit your VAT Returns.

You can also appoint a tax agent to submit your VAT returns and deal with HMRC; once you receive your VAT number then you can sign up for a VAT online account.

You should get a VAT registration certificate within 30 working days, sometimes longer; it is sent to your VAT online account or by post.

How to save money when collecting and sending payments

Due to exchange rate mark-up that’s usually around 3 - 6%, converting to sterling can be quite expensive using traditional banks. To reduce this cost, use Wise multi-currency account to receive payments in EUR, USD, AUD, NZD and GBP for free, convert and withdraw to your local bank account in minutes using the real exchange rate and with low, transparent fee and up to 14x cheaper than PayPal.

You can also use Wise to withdraw your money from PayPal if it's in a different currency. This way, instead of paying 2 - 4% on PayPal’s conversion fee to exchange the balance to your local currency, you’d only pay an average of 0.75% using Wise.

Wise is a groundbreaking company with over 5 million customers globally taking an innovative, fresh approach to financial services.

Wise is known for offering one of the fairest exchange rates in the business instead of inflating their exchange rates with hidden fees.

You can take advantage of the following additional benefits:

• Payroll to overseas contractors
• Payments to vendors and suppliers in over 40 currencies
• A unique integration with Xerofor multi-currency accounting
• Multi-currency debit card attached to the account

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