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VAT registered Ebay or Amazon sellers charging postage as disbursements

VAT registered Ebay or Amazon sellers charging...

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Hi All,

I am helping with a VAT return for a client who sells on Ebay.

When a seller sells on Ebay they charge a fee for the item, and also in some cases charge a postage cost.

Eg:

Item cost £120, Postage £12

I have been looking into charging the postage cost as a disbursement and reading the following:

HMRC disbursement webpage

http://www.hmrc.gov.uk/vat/managing/charging/disbursements.htm

HMRC Postage and delivery charges webpage

http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortalWebApp.por...

Disbursements section in Notice 700 The VAT Guide

http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortalWebApp.por...

Questions:

Has anyone here succesfully claimed postage as a disbursement for an Ebay client?

In section 2 of the Postage and Delivery Charges help from HMRC (second link section 3.2) it mentions Royal Mail - so does this mean that postal disbursements can only apply to Royal Mail (and maybe parcel force) OR would courier companies such as City Link and UPS also be included?

I assume that if disbursements can be claimed, the postal cost would have to be identical to the price passed on to the customer, packaging charges (envelopes, tape etc) would not be exempt. Is this correct?

If the above was the case then perhaps it would be a good idea to encourage my client to only charge the exact postage fee on their listing and sink the cost of packing into the item cost to make it easier to get the total postage cost for all the items.

If couriers such as UPS and City Link do not save any vat then maybe free postage should be offered and the courier cost sunk into the item cost.

This way when I analyse the monthly paypal statements I can see that all the postage charges are indeed only for royal mail and can be treated as a disbursement.

Your thoughts and comments on this would be appreciated,

Regards

Dom

Replies (7)

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By Jennie Gillam
28th Apr 2014 11:51

I believe that one of the most pertinent points of a disbursement, is that you must be acting as an agent for the third party, and the supplier of the service is aware of this fact.  Their contract is actually with the end-client, not with you as the "middle-man" and therefore in this case, the eBay seller is not acting as an agent so the postage cannot be construed as a disbursement.

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By DMGbus
28th Apr 2014 13:45

Plantiflor Ltd case

The immediate case that comes to mind is the Plantiflor Ltd case (Spalding Bulb Co).

Plantiflor Ltd LOST the case that postage was a VAT exempt disbursement, Tribunal decision was that delivery/postage costs follow the liability of the goods supplied (eg. SR for plants. ZR for books).

Plantiflor Ltd failed to persuade the Tribunal that postage was in fact a disbursement.

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By dom232323
29th Apr 2014 09:19

Thank you both for your help on this one. Very concise and useful explanations.

I'm just reading the Plantifor Limited case now.

http://www.publications.parliament.uk/pa/ld200102/ldjudgmt/jd020725/plan...

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By Old Greying Accountant
29th Apr 2014 13:13

The point is ...

Royal Mail is VAT exempt

"In section 2 of the Postage and Delivery Charges help from HMRC (second link section 3.2) it mentions Royal Mail - so does this mean that postal disbursements can only apply to Royal Mail (and maybe parcel force) OR would courier companies such as City Link and UPS also be included?"

Yes, only Royal Mail - third party couriers are standard rated and therefore normal VAT rules apply. If they did charge as a disbursement they would not be able to reclaim the VAT and would have to charge the gross amount so it is as easy to reclaim VAT and charge the net and apply VAT, if they add no mark-up the price to the end user is the same!

The added problem is that it is often cheaper to use Parcel Force, they are a standard rated carrier although you still take the parcel to the Post Office!

As a supplier it is far easier just to treat postage as a re-charge and apply VAT, not as a disbursement, you are just making a load of admin work for yourself but get no benefit yourself so why bother?

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By Alonicus
29th Apr 2014 12:19

Royal Mail are not always VAT exempt

Even before privatisation, shortly after the Royal Mail regulator changed from PostComm to Ofcom they started charging VAT to customers with business accounts. 

While most (but I don't believe all) post paid for at a Post Office counter is VAT exempt, once a customer opens a business account, they normally move onto a pricing structure where most postage types are quoted and charged exclusive of VAT.  To be sure, you'd need to look at the invoice or check Royal Mail's (rather over-complex) rate tables.

From memory, STL and SD1 service codes are VAT exempt, while CRL, OLA and T201 (among others) are standard rated.

Amazon have always levied Marketplace fees based on total sale value including postage.  Ebay introduced a 10% fee on postage charged a few months ago as part of a raft of measures to encourage sellers to offer "free" shipping (i.e. in practice to include postage in with the item price).

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Replying to AnnAccountant:
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By Old Greying Accountant
29th Apr 2014 13:02

Yeah right ....

Alonicus wrote:

 Ebay introduced a 10% fee on postage charged a few months ago as part of a raft of measures to encourage sellers to offer "free" shipping (i.e. in practice to include postage in with the item price).

... personally I believe it was more to stop sellers over-charging postage and under-charging items to avoid E-bay's rip-off charges.

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Replying to mikescore:
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By dom232323
29th Apr 2014 13:17

ebay fees

Old Greying Accountant wrote:

Alonicus wrote:

 Ebay introduced a 10% fee on postage charged a few months ago as part of a raft of measures to encourage sellers to offer "free" shipping (i.e. in practice to include postage in with the item price).

... personally I believe it was more to stop sellers over-charging postage and under-charging items to avoid E-bay's rip-off charges.

 

agreed!

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