VAT Inspection turnover limit?

JasonLVC

martindow wrote: »

I think UK Ebay and Paypal fees are liable to Luxembourg VAT at 15%. I've no idea how they get away with this fiddle when clearly they are trading in the UK.

The VAT treatment of services is different to goods. Goods, the VAT rate is based on where the goods are when they are sold, so a UKL warehouse shipping astock to UK customers = UK VAT. But for services, the VAT treatment is different.

If the customer is another business, then the VAT rate applied is where the business customer is (thus a UK business customer shifts the VAT to the UK and away from Lux/Ireland) but if the customer is not a business then the VAT rate is based where the seller/supplier is based, thus for ebay and paypal who deal mainly with individual customers who are not a business, ebay/paypal will charge Lux VAT for their services. The Lux authorities get the VAt, UK gets nothing.

Wywth

berbastrike wrote: »

This is basically what is happening

Without VAT:
Sell at £100
Buy at £50
Postage £30
Payment fees £10
Profit £10



With VAT
Sell at £100
Less £20 Vat paid on sale
Buy at £50
Plus £10 Vat claimed back on purchase
Postage £30 NO VAT
Payment fees £10
Plus £2 claimed back on payment fees

Profit £2

I suggest you get yourself a good accountant.

They'll be worth their weight in gold ... probably worth a lot more than that actually

martindow

JasonLVC wrote: »

The VAT treatment of services is different to goods. Goods, the VAT rate is based on where the goods are when they are sold, so a UKL warehouse shipping astock to UK customers = UK VAT. But for services, the VAT treatment is different.

If the customer is another business, then the VAT rate applied is where the business customer is (thus a UK business customer shifts the VAT to the UK and away from Lux/Ireland) but if the customer is not a business then the VAT rate is based where the seller/supplier is based, thus for ebay and paypal who deal mainly with individual customers who are not a business, ebay/paypal will charge Lux VAT for their services. The Lux authorities get the VAt, UK gets nothing.

Thank you for the explanation but it really is a fiddle isn't it? An artificial business structure devised to avoid paying tax.

If someone claims benefits and has done anything to reduce their savings, such as giving money away to their children, to enable them to receive a means tested benefit they are assessed as if they still had the money.

It would be good if there were similar deprivation of assets rules to force big companies like Ebay, Paypal, Starbucks and the rest to pay their fair share to the UK.

terra_ferma

OP your business model sounds like a recipe for disaster. If I understand the figures right, it sounds like you would need to spend £62.500 in order to earn £12.500 (and this assuming you don't have any other expenditure like IT, stationery, packaging materials etc etc).
This means that you have to make sure you find £62500 to buy stock every year, and that a lot of your money is tied up in stock. A lot can go wrong, for example paypal and other payment gateways can put holds on your money (rolling reserve).
Not only that, but looking at the bigger picture, the price of those products is kept artificially low by sellers who are miscalculating their pricing, while those with a healthier business model, to make them viable long-term, are squeezed out of the market.

last thing, I know your figures are probably just ball park, but assuming you are selling on ebay, your fees don't sound right. It will depend of the type of products, but if you take into account all of ebay and paypal's fees, including your ebay shop monthly fees, your figure seems a bit low to me.

Cardinal-Red

martindow wrote: »

Thank you for the explanation but it really is a fiddle isn't it? An artificial business structure devised to avoid paying tax.

If someone claims benefits and has done anything to reduce their savings, such as giving money away to their children, to enable them to receive a means tested benefit they are assessed as if they still had the money.

It would be good if there were similar deprivation of assets rules to force big companies like Ebay, Paypal, Starbucks and the rest to pay their fair share to the UK.

I don't think it's a fiddle at all - it's no different to, say, lowering the CT rate in your country to attract businesses to set up there.

Remember the Lux-based business doesn't benefit from this in a material sense, in fact it is the consumer who benefits by paying less VAT on the service.

In any case these rules change from 2015 (TBC!) so even these direct to consumer services will be charged to VAT where the person lives.