Ebay & PayPal fees applied to VAT element of postage costs

sysdevman

Ebay and PayPal apply mandatory fees to the VAT element of postage costs.

So if a a seller pays £5 plus VAT for postage costs (i.e. £6) Ebay charges 60p (i.e. 50p for the postage and 10p for the VAT). PayPal does likewise.

Do they pay VAT on this additional charge?

Also, is it allowed under current tax rules?

System

Have you read https://www.gov.uk/government/publications/vat-notice-70024-postage-and-delivery-charges/vat-notice-70024-postage-delivery-charges-and-direct-marketing to see how VAT gets accounted for in different situations? I would think in most cases the cost of the item plus postage is considered as a single supply, not separate items, so the charge applies to the total cost.

martindow

I believe the delivery charge is VAT rated according to the goods sent. For most things where VAT is charged at 20% the delivery charge will also be subject to 20%. With books, for instance, both the books and delivery should be 0% VAT. I've no idea if Ebay or Paypal respect this.

RFW

martindow wrote: »

I believe the delivery charge is VAT rated according to the goods sent. For most things where VAT is charged at 20% the delivery charge will also be subject to 20%. With books, for instance, both the books and delivery should be 0% VAT. I've no idea if Ebay or Paypal respect this.

Ebay (and Paypal) charge a fee for their services, whether the item sold is zero rated or standard rate is irrelevant.

You are correct about the postage charges (where the supplier is Royal Mail). If an item is £100 standard rate and £10 (plus VAT) postage (total £112), Ebay charge £11.20 fees. Their fee includes VAT.
If the item is £100 zero rate plus £10 postage, Ebay charge £11 fee and that fee also includes VAT.
It's down to the seller to make sure they charge the correct amount for VAT, whether it's inclusive or not. At all times, Ebay are only selling their service, never a product.

System

They are not applying VAT on the items sold but on the fees which is a service so VATable at 20%

RFW

!!!!!! wrote: »

They are not applying VAT on the items sold but on the fees which is a service so VATable at 20%

Not used Ebay for a while but as far as I know they still use Luxembourg VAT rate which is 17% standard rate.

System

Under the new VAT system it will be 20% for non-business sellers and the Luxembourg rate for sellers