As experts in accounting for e-commerce businesses, we see a lot of startup and smaller E-commerce sellers tying themselves in knots over the VAT rules.
So we have prepared this guide to answer some of the questions we are routinely asked on VAT for ecommerce beginners.
Do I need to register my Ecommerce business for VAT?
There are two instances in which any business must register for VAT:
- When in any 12-month period taxable supplies exceed £85,000.
- When there is a reasonable expectation that taxable supplies will exceed the £85,000 threshold in the next 30 days. In this instance, a business must register from the start of the month in which they expect turnover to exceed the threshold.
What is meant by a taxable supply?
A taxable supply includes goods that would be standard or zero-rated supplies but not exempt supplies.
Can I register for VAT even if I don’t meet the threshold?
A business can voluntarily register for VAT even if it is not making taxable supplies above the threshold and this would be beneficial when:
- The business makes zero-rated supplies. In this instance, there will be no output tax charged on sales but the business will be able to claim the input VAT that is charged on purchases.
Do I have to send a special invoice?
A business needs to issue a VAT invoice when it makes a standard-rated supply to a VAT-registered customer.
A VAT invoice is not required if the supply is exempt, zero rated or if the supply is to a non-VAT registered customer.
A VAT invoice should be issued within 30 days of the date the supply of goods is treated as being made.
What do I need to put on my invoice?
The following information is required on a valid VAT invoice:
- VAT registration number
- The date of supply (tax point)
- The rate of VAT for each supply
- The VAT-exclusive amount for each supply
- The total VAT-exclusive amount
- The amount of VAT payable
I buy and sell within the EU can I reclaim VAT and do I still need to charge it?
Let’s break this one down into two parts:
Importing from the EU
When a business imports goods into the UK from the EU then VAT has to be accounted for at the date of acquisition. This is the earlier of the invoice date or the 15th day of the month following the month the goods entered the UK.
The VAT charges fall under the ‘reverse charge scheme’ where the business will account for the VAT charge as output VAT and then reclaim it as input VAT meaning there is effectively no VAT charge
Exporting to the EU
Where a UK VAT-registered business is making taxable supplies to other VAT-registered businesses in the EU then the supply is zero-rated.
This means that supplies to VAT-registered EU businesses fall within the definition of “taxable supplies” and should be included when considering if a business has over a 12-month period or will in the next 30 days exceed the VAT threshold and have to register.
Goods supplied to a non-VAT registered customer in the EU must be treated like a UK sale with VAT applied as normal.
As an Ecommerce entrepreneur, you will need to register for VAT if in the last 12 months, or in the next 30 days you reasonably expect that your taxable supplies will exceed the VAT threshold of £85,000.
The term ‘taxable supplies’ includes all standard and zero-rated supplies, which includes anything sold within the EU.
It may be beneficial to a trader making zero-rated supplies to voluntarily register for VAT so that they can reclaim any input VAT on purchases ahead of exceeding the threshold.
In addition, there are a number of VAT schemes that a business can register for providing they meet the eligibility criteria and these include:
If you have any questions or you’re unsure about anything regarding your Ecommerce business and VAT, feel free to contact us and speak to one of our team members.
Or you can book a free, non-obligation discovery call with our team via our calendar below.