VAT and ebay

Jazzguy1

Hi
I am new to VAT and have just registered after being told by ebay that i have to
I wm unsure as to how VAT works and need some advice
My understanding was that  as an example, i sell and item for 10£  then add Vat on top and keep the £2 aside to send to the VAT man

Is this correct?
In reality ebay are saying my auction items are inclusive of VAT  the buyer is not charged any extra than the auction end price.
 If it sells for 10£  then there is no VAT added on top , i just have to pay the VAT to HMRC in my VAT return
This seems infair as i am now paying 40% tax  ie my regular income tax at 20% plus  now the 20%  vat
If i sell an item for 10£  i want £10  not 8£  !!

I i have asked my buyers and they have no vat  itemised on their bill from ebay

A i missing something or am i not understanding VAT correctly.

I cannot reclaim vat on the stock i.buy as it is mostly exempt. It is only when i resell the items they qualify for VAT

DullGreyGuy

In the UK when you market to consumers the price you show must include VAT as standard so your example is incorrect... if you sell it for £10 then you get £10 cash inc vat meaning you get £8.33 and pay HMRC £1.67 for the VAT, you don't add £2 on top. If you want to retain £10 then you have to sell it for £12.

What you are missing is you can now recover VAT on your supplies... what are you selling that is VAT exempt on purchase but standard rate VAT on sale?

Jazzguy1

Thanks so i lose out and am effectively paying 40% tax!
I can increase the starting price say from 9.99 to 12.99  so i cover 2.00 vat but these are auction items so if it sells for 100 then i have to  pay 20£ to HMRC  . The 2£ i saved  by increasing the starting price hardly covers that. I cannot dictate the end orice


I have asked a buyer and he said he won the item for 100£ and that is all he paid not £120  there is no mention of VAT on his bill so i am.out of pocket by paying that 2£ myself
I already pay income tax on it 

I sell autographs.
I buy complete books at auction (  books are exempt) then sell pages seperately which are not exempt.

DullGreyGuy

Jazzguy1 said:

Thanks so i lose out and am effectively paying 40% tax!
I can increase the starting price say from 9.99 to 12.99  so i cover 2.00 vat but these are auction items so if it sells for 100 then i have to  pay 20£ to HMRC  . The 2£ i saved  by increasing the starting price hardly covers that. I cannot dictate the end orice


I have asked a buyer and he said he won the item for 100£ and that is all he paid not £120  there is no mention of VAT on his bill so i am.out of pocket by paying that 2£ myself
I already pay income tax on it 

I sell autographs.
I buy complete books at auction (  books are exempt) then sell pages seperately which are not exempt.

Your maths is wrong, if you sell for £100 that is £83.33 + £16.67.... if it was £80 net the 20% VAT would be £16 making a total of £96

The buyer will pay their bid price, their bid isn't randomly increased by 20% if they are in the UK and the seller is in the UK and the seller happens to be VAT registered its effectively their problem. If the buyer isn't in the UK then the UK VAT is 0% and they may or may not have local VAT added on top of their bid price but eBay themselves collect and deal with that foreign VAT. 

Unfortunately the tax system is designed to give benefits to the smallest of companies hence the £85,000 revenue threshold for VAT and the 19% corporation tax for under £50k profit -v- the 25% for over £250,000 but its a fair shock when you start earning enough to lose the benefits of being a small business. 

DE_612183

No, you can't dictate the end price - but you have to work on the basis that whatever it sells for you only get 80%.

If you sold at fixed price it would be £12 - £10 + VAT and the end user pays that ( not you ).

DullGreyGuy

DE_612183 said:

No, you can't dictate the end price - but you have to work on the basis that whatever it sells for you only get 80%.

83.33% gees, what's happening to peoples maths

sheramber

When you buy consumer goods in a shop that inclur VAT,  the VAT is included in the ticket price.

You are not cherged 20% on top of that price, norf do you get a VAT receipt.

Jazzguy1

So i am charged TWO lots of tax  the VAT and  income tax.  Thats 40% . I suppose i can see now why a lot of businesses close a couple of days a week to avoid the VAT threshold.  Very wise

sheramber

Jazzguy1 said:

So i am charged TWO lots of tax  the VAT and  income tax.  Thats 40% . I suppose i can see now why a lot of businesses close a couple of days a week to avoid the VAT threshold.  Very wise

VAT is part of your price and is paid by the buyer. 

You are a  tax collector on behalf of HMRC- you collect the VAT on their behalf and pass it on to them. 

You need to factor that into the price you accept for an item. You can set a minimum price you are prepared to accept. 

Grumpy_chap

Jazzguy1 said:

Hi
I am new to VAT and have just registered after being told by ebay that i have to
I wm unsure as to how VAT works and need some advice
My understanding was that  as an example, i sell and item for 10£  then add Vat on top and keep the £2 aside to send to the VAT man

Is this correct?
In reality ebay are saying my auction items are inclusive of VAT  the buyer is not charged any extra than the auction end price.
 If it sells for 10£  then there is no VAT added on top , i just have to pay the VAT to HMRC in my VAT return
This seems infair as i am now paying 40% tax  ie my regular income tax at 20% plus  now the 20%  vat
If i sell an item for 10£  i want £10  not 8£  !!

I i have asked my buyers and they have no vat  itemised on their bill from ebay

A i missing something or am i not understanding VAT correctly.

I cannot reclaim vat on the stock i.buy as it is mostly exempt. It is only when i resell the items they qualify for VAT

OP - do any of these threads help?
https://forums.moneysavingexpert.com/discussion/6480461/ebay-want-me-to-register-for-vat#latest

https://forums.moneysavingexpert.com/discussion/6494593/ebay-vat#latest

https://forums.moneysavingexpert.com/discussion/6480481/vat-issue-with-ebay/p1

It is very confusing when the same question is distributed across multiple threads.

Can the OP answer any of the questions they have been asked before?
 - Why do eBay want the OP to register for VAT?
 - Is the OP selling so much that the turnover requires the OP to register for VAT?
If the answer to the second question is "yes" then the OP is trading and needs to register as such, with eBay and with HMRC.  Also, given this would mean that the OP is running a business, and the limited knowledge of how business matters work as evidences by the queries asked, the OP would do very well to engage the services of an Accountant to advise on the best way to keep proper records and avoid landing in hot water.

Archerychick

Jazzguy1 said:

Hi
I am new to VAT and have just registered after being told by ebay that i have to
I wm unsure as to how VAT works and need some advice
My understanding was that  as an example, i sell and item for 10£  then add Vat on top and keep the £2 aside to send to the VAT man

Is this correct?
In reality ebay are saying my auction items are inclusive of VAT  the buyer is not charged any extra than the auction end price.
 If it sells for 10£  then there is no VAT added on top , i just have to pay the VAT to HMRC in my VAT return
This seems infair as i am now paying 40% tax  ie my regular income tax at 20% plus  now the 20%  vat
If i sell an item for 10£  i want £10  not 8£  !!

I i have asked my buyers and they have no vat  itemised on their bill from ebay

A i missing something or am i not understanding VAT correctly.

I cannot reclaim vat on the stock i.buy as it is mostly exempt. It is only when i resell the items they qualify for VAT

My first question would be, do you actually need to be VAT registered?