VAT and internet trading explained by Neil Warren, Part 1
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VAT and trading online: Part 1 – Third parties


Neil Warren considers whether online marketplaces are underpaying VAT and why three-party online arrangements for online sellers can be so difficult to untangle.

14th Aug 2020
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This is the first article of a four-part series about VAT and online marketplaces that can sell anything from hotel bookings, bespoke essays (as in the All Answers case) to pornography (Only Fans).

Three party problem

VAT has always been a tricky tax when there are three parties involved in a deal.

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Replies (8)

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By David160
17th Aug 2020 11:25

Looking at websites such as Amazon and Ebay, who has to declare output VAT there? The traders appear to have control over the goods supplied, price, delivery etc. Does Amazon/Ebay merely provide the setting in which trade occurs, like a website provider or a shop inside a shop where rent is paid? I have heard rumours that the rules may be changed to make Amazon/Ebay responsible for declaring the output VAT in full for all trading done on their websites.

What do you think?

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Replying to David160:
By BryanS1958
17th Aug 2020 12:04

Amazon, etc aren't even willing to pay their fair share of tax on UK related profits, so what do you reckon the chances are that they would account for VAT?:-)

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By PatrickMorrello
17th Aug 2020 11:58

If my client is in the situation of running a website which promotes services supplied by others, how do they make sure that they are acting as agent? Does the agency arrangement need to be disclosed to anyone buying the services, or is it enough that the agency arrangement is clear from the contract between the website owner and the service supplier?

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By Alonicus
17th Aug 2020 12:02

Amazon and eBay are (generally) a much simpler case, at least in theory.

The third party seller is fully responsible for VAT on the goods they sell on the platform, under normal VAT rules. There is an issue of Chinese sellers evading VAT, but that's more a compliance issue than a rules-based one.

The marketplace charges the seller fees for the service they provide, which is that of selling on their platform. Those fees are subject to VAT; the main difference between eBay and Amazon being that eBay UK charges UK VAT, while Amazon is (notionally !) domiciled in Luxembourg. If a seller is UK VAT registered, then reverse charge rules for services are applied. This may change after Brexit; my personal opinion is that it should, the platforms should have a UK entity for the services they provide in order to reduce their scope for tax avoidance.

In terms of the new Digital Services Tax, eBay have been ethical and agreed to absorb it. Amazon will be adding it to the fees they charge third party sellers (thus defeating the entire purpose of the tax).

In terms of the level of control third party sellers have, that's an interesting discussion all of it's own ! Again, Amazon are the elephant in the room here, and for FBA sellers at least, it could be argued that Amazon has 100% control of the service and delivery, with very significant influence over the price (they effectively apply price caps and provide "guidance" as to what the price should be), and that the FBA sellers are merely providing Amazon with off-books inventory. It's only a matter of time before a seller argues that Amazon should treat them as PAYE !

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Replying to Alonicus:
By petestar1969
17th Aug 2020 13:23

If Amazon were to become liable for VAT for everything sold through their platform it wouldn't solve anything, they would just pass it onto their sellers who would either recover it if they themselves are VAT-registered, or pass it on to the end customers.

The second option would go towards the UK government's aim of trying to level the playing field between Amazon and the High Street retailers by making stuff bought on Amazon by Joe Public more expensive.

It probably won't do any harm to Amazon themselves in much the same way the new Digital Sales Tax will just be passed on.

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By Mister O
17th Aug 2020 12:56

Only Fans just seems like an update or modernisation on Spearmint Rhino to me?

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By Dwilliam
17th Aug 2020 16:10

My question as someone thinking of becoming a creator on OnlyFans is , if the 80% earned would be considered outside the scope of VAT and not count towards the Vat threshold, or if it would.

It's something that there seems to be a difference of opinion on both from accountants and speaking to HMRC online, HMRC have indicated that if the sales fall under the VATMOSS provision they may be considered outside the scope, but upon their advice i have written to the Enquiry team for their clarification.

Just wondering if you guys consider it a creator - b2b- OF - b2C end user , so in essence 2 transactions or if under the digital service rules its creator b2c (through OF) to end user and as such the income for the creator is outside the scope in relation to VAT

I run my own business dealing in Physical goods & have run a Vat registered company before so i am aware of how complicated VAT rules can be and as such need to figure out if i take up this venture if the Only Fans sales would be added to my turnover threshold for VAT or not.

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By AndrewV12
18th Aug 2020 11:47

scroll UPWARDS and look at the picture of the world, it sums up all the problems for tax legislator and tax collectors.

No boundaries, no boarders, no trading blocks, just a lot of glowing lights on a section of a globe and a load of pink neon lights connecting the lights.

Dont forget the sun newspaper headline, one Chelsea footballer pays more UK tax than Amazon and Starbucks.

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