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Vat Related Query

Vat Related Query

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Hi,

My client has ebay business since 15/08/2020 and got it vat registered wef 1/2/21. The client would like to claim vat on eBay commission as he paid large amounts in June & July,2020.

Would eBay commission be treated as services and can the input vat on eBay commission be claimed for the pre-vat registration period?

Thanks!

Replies (15)

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By Paul Crowley
18th Oct 2021 19:48

In each case the commision relates to a specific supply, as I understand it
So if the supplies are being VATed then the input could be VAT reclaimed.

But June and July 2020 are before the business commenced?

Am I misunderstanding the word commision?

Thanks (0)
panda ketteringUK
By ketteringUK
18th Oct 2021 22:43

It's not like it's a computer, server or capital expenditure which has benefit in future periods. Goods bought before the vat reg, sold before vat reg & comm taken.

Will give you specific reg tomorrow.

Btw - aren't eBay fees subject to reverse charge like Amazon and Etsy?

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Replying to ketteringUK:
Jason Croke
By Jason Croke
18th Oct 2021 22:51

eBay fees are reverse charge IF you tell eBay you are a business, if you don't identify as a trader, eBay will charge UK VAT (MOSS digital services to consumer).

So OP likely has a client who was trading not as a business initially or hadn't told ebay they were a trader.

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Replying to Jason Croke:
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By Wanderer
19th Oct 2021 03:02

Are you sure Jason?
I have eBay invoices with no VAT up to & including July 2017 which were reverse charged & invoiced by eBay Europe S.a.r.l .
From August 2017 they started charging UK VAT with a Richmond, Surrey address & a UK company, EBAY (UK) LIMITED.
Lots of references via Googling- ebay VAT August 2017, e.g.
https://community.ebay.co.uk/t5/Archive-Business-Seller-Board/20-Vat-in-...
https://www.taxation.co.uk/articles/2017-08-08-336793-ebay-starts-chargi...
This is from eBay in July 2017:-

eBay wrote:
Changes at a glance
✓ From 1 Aug 2017, eBay sellers living in the UK will contract 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.
✓ We currently charge UK VAT of 20% on seller fees for non-business sellers. This won’t change and you won’t see any changes in your overall fees.
✓ Beginning 1 Aug 2017 we’ll start adding UK VAT at the standard rate of 20% on fees billed to business sellers.
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Replying to Wanderer:
Jason Croke
By Jason Croke
19th Oct 2021 08:10

Hi Wanderer

I thought eBay still invoiced from its non-UK entity when billing UK VAT registered traders, so as to avoid charging VAT and instead use reverse charge?

We've got clients here and I don't recall seeing any eBay invoices with VAT on, on saying that, I don't actually do that many VAT returns myself and so I'll ask around the office this morning. Happy to learn new stuff, this forum not just about giving information, receiving is also great!

But you are right, if invoicing from a UK entity then eBay will charge UK VAT regardless of any reverse charge or miss rules.

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Replying to Jason Croke:
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By Carolynne
19th Oct 2021 09:37

I have a client who receives these ebay commission fees with UK VAT.

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Jason Croke
By Jason Croke
18th Oct 2021 22:46

As Paul has posted already, if the business commenced 15th August 2020, then how can it have incurred eBay costs in June/July 2020 (which is before the business existed)?

On what basis was the VAT registration, voluntary or compulsory?

For services incurred prior to registration,you can only go back 6 months from date of VAT registration, which is 6 months from 01 February 2021.

So the June/July costs don't appear to be in time.

Thanks (1)
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By rmillaree
19th Oct 2021 07:27

Ref fees you should always check vat invoices but highly likely that uk vat has been charged by ebay for uk related transactions.

If vat billed by ebay directly relates to specific sales fees for sales on which no output vat was due (pre vat reg) it would seem likely to me that no vat can be reclaimed. Jason Croke can you confirm if you agree with this statement - cheers ?

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Replying to rmillaree:
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By Humble
19th Oct 2021 15:55

I value your feedback. You have raised an important question. Jason could you please comment on this.

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Replying to Humble:
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By rmillaree
19th Oct 2021 16:30

Although post this morning was on the hoof - i stand by my comments
the vat technical manual says the following

"A business may not use regulation 111 to recover tax on goods or services that formed part of onward supplies it made before the effective date of registration."

https://www.gov.uk/hmrc-internal-manuals/vat-input-tax/vit32000

Based on this text i would say highly likely no claim can be made.

there are any number of random (not usually to be fully trusted) that confirm no claim is allowed where services have been fully consume. Example below

https://cheaperaccountant.co.uk/can-i-reclaim-pre-registration-vat/
• Reclaiming VAT paid before registration on goods or services is possible if the goods or services have not been fully consumed before the business is registered for VAT.

random note if you are renting premises and had had box of widgets stored there for 6 months waiting to be dispatched post vat registration you may have an argument that rent payment invoices hadnt been fully consumed as the storage aided post registration supplies.

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Replying to rmillaree:
Jason Croke
By Jason Croke
20th Oct 2021 08:36

I agree rmillaree, the ebay services have been "consumed" prior to registration, so even if the ebay fees were within time (which they are not), then they are not recoverable on the basis of Reg. 111

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By Humble
19th Oct 2021 16:03

Hi one & all,

Thanks a lot for all of these helpful feedbacks. There was a typo in my query the client’s business start up date was 15/06/21. The commission invoice was issue by eBay, London UK to my client’s business address in the UK. I have prepared draft workings for vat quarter. The client has not charged any vat on his sales for the pre-vat registered period [15/6/20 to 31/1/21]. However with regards to eBay commission, this comes under services and as per vat rules you can claim vat on service for 6 months pre vat registration. Therefore the client would like to claim vat paid on commission. Everything is black & white and eBay invoices show breakdown of vat.
I don't want to miss out on any obvious vat rules for such businesses. Thanks!

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Replying to Humble:
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By Paul Crowley
19th Oct 2021 16:47

"would like to claim vat on eBay commission as he paid large amounts in June & July,2020."

More than 6 months?

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Replying to Paul Crowley:
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By rmillaree
19th Oct 2021 17:34

As per my earlier comment it seems reasonably clear to me if that input vat on sales fees relates directly to goods/services fully "supplied" pre vat registration then no vat can be reclaimed anyway even if its within the 6 month window.

Thanks (1)
Replying to Humble:
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By Hugo Fair
19th Oct 2021 17:20

Can you please take care (i.e. review and edit if necessary) when posting.
Do you really now mean that "the client’s business start up date was 15/06/21" - or should that say 15/06/20?

If your whole post revolves around timing issues, then it wastes everyone's time if we have to guess what dates you meant instead of those you've provided.

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