It has emerged this week that eBay sellers in the UK will soon be made to pay 20 per cent added value tax on their fees from later this year when the world’s most famous auction site and online marketplace has a major overhaul of its corporate structure.
eBay has told sellers that live in the UK that they will have to start paying fees to its UK business instead of its Luxembourg subsidiary, from August. According to eBay, this is a result of a legal restructuring of the business. But the forthcoming change to eBay’s policies isn’t just down to this restructuring, it comes amid a continuing drive by the UK government to try and get more internet sellers to register for VAT in a bid to tackle the growing problem of tax evasion by overseas online sellers.
Unfortunately for many UK sellers, the market on eBay (and Amazon) is now dominated by overseas sellers. According to an investigation by the Guardian in 2016, over 40 per cent of Android phones sold are sold by firms registered in China whilst Chinese-based companies account for more than 60 per cent of sales of Christmas tree fairy lights.
During the Guardian’s 2016 investigation, it found that Amazon was even offering a large amount of support services at its British warehouses to overseas sellers that we’re doing very little to try and hide their VAT evasion. As well as advertising these sellers goods on its website, Amazon holds stock for these businesses, arranges deliveries and deals with their complaints and returned goods. They even offer gift-wrapping services on behalf of some fraudster sellers. Neither Amazon or eBay knowingly facilitate fraudulent VAT-free sales, but there is an increasing awareness that VAT evasion in online shopping is a big problem.
The biggest impact will be on those traders that have a business account with eBay but who have not registered for VAT. The message that these sellers received this week was as follows:
“We’re making some changes behind the scenes to improve the way we run eBay. Although this may affect the way we charge VAT on eBay fees, there is no change to the fees themselves. In addition, these changes apply only to eBay sellers living in the UK.
At a glance
- From 1 August 2017, eBay sellers living in the UK will start contracting with eBay (UK) Limited instead of eBay Europe S.à r.l.
- The change affects a number of our agreements, including our User Agreement, User Privacy Notice and Billing Agreements.
- Our net fees will not be affected by this change. There will be no change to the services we provide and you will not need to update any of your listings.
We currently apply UK VAT at the standard rate of 20% to all fees incurred by UK based sellers that are not registered with eBay as a business seller.”