Dropshipping in the UK, do I need to register for VAT?

[kellu]

Hi all,

I am looking for some tax advice regarding VAT and dropshipping:

I run a dropshipping business on eBay where as soon as I receive an order, I order that directly to the customer from my supplier. I do not charge VAT from my customers, but VAT has already been paid on the items that I buy from my supplier.

I receive money for the orders via PayPal (UK) and order the items to my customers using a UK credit card.

The amount of profit per order is minimal (around £1) but the business is based on selling on a mass scale. Therefore, I am going to reach the £82k yearly turnover limit very quickly. However, it would be absolutely impossible to pay 20% VAT on the orders due to the profit margin being well under 10%.

Does VAT apply to dropshipping like it does to any other business?

For the record, I am not a UK resident and I am a tax resident of another country. I don't have a company and I am not registered as a sole trader either.

 

[john1989]

If you are not a UK resident but are making taxable supplies in the UK, the threshold for VAT registration is £0

Therefore, if you are making sales in the UK, you should already be registered.

 

[Gecko001]

When you say that you are not a resident in the UK, does that mean you do not live here but in another country?

 

[MyAccountantOnline]

.....
Does VAT apply to dropshipping like it does to any other business?

.....

Yes it does.

Have a read here https://www.gov.uk/vat-registration/when-to-register

 

[john1989]

There's also this link
http://www.taxtrends.org/2012/10/new-vat-rules-for-non-uk-established.html

 

[kellu]

If you are not a UK resident but are making taxable supplies in the UK, the threshold for VAT registration is £0

Therefore, if you are making sales in the UK, you should already be registered.

When you say that you are not a resident in the UK, does that mean you do not live here but in another country?

Yeah I am not a British national and I don't live in the UK either. Thanks for all the advice and the links guys.

I wonder how the other UK dropshippers are doing it, since there are many of them doing significantly larger volume (I estimate turnover +£1 million per year) but they are definitely not charging VAT as this would render them uncompetitive and the business model would not work.

I am by no means willing to evade taxes, but trying to figure out a solution how this business model can work legally, which seems very confusing.

 

[producer69]

Hi,
I'm from Bulgaria (EU), doing dropshipping from Amazon UK to eBay UK, started an year ago.
Right now I really need a serious help from anyone here.
So, 2 days ago I received an e-mail from eBay UK:

"You may need to take actions due to the upcoming changes in the UK Value Added Tax (VAT) rules. Depending on your items location and the size of your business you may need to register for VAT in the UK.

Please take an action prior the new TAX rules are being in place as of spring, 2018.

Please check your eBay business profile within the UK, and ensure that you have registered for VAT in the UK:

• If you are located overseas and forward deploy inventory to the UK (your items are located in the UK).

• If you post goods to the UK from another EU country and sale for £70,000 and more (approx. USD 99,700/EUR 80,000) a year.

If you’re selling items to the UK or within the UK, and not compliant with the UK new tax rules, you will be stopped from selling on eBay site."

Would anyone with experience and knowledge help me with details about that matter, please?
Honestly, I'm totally unclear about how to register for VAT in the UK.
I don't have an UK address, a firm or whatever.
I already contacted HMRC via their webchat, but all I was told was to sign up and to follow the instructions.
I explained that I'm actually doing a service between sellers and buyers and I don't have items stored in UK. Then I was answered that once I register for VAT in the UK, 20% VAT will be applied to my commissions. That was all.
But as long as I know, eBay already apply VAT to every single selling, monthly invoice, etc. So, does it mean that I have to be taxed with another 20% VAT, i.e. twice?
Then, once I register for VAT in the UK, how will I render account to HMRC, which procedures do I need to follow, etc.?
And when starting to register, which option to check? The person from the webchat of HMRC told me to choose "Organisation", but I'm not sure why?

As you can see, I'm totally confused and unclear about the VAT registering and that's why I'm deeply count on everyone's help here.
Please, give me some important advice, help and all the information I need for that!
The more detailed info and explanations, the better help and understanding by my side.

Big thanks in advance to everyone!!!

 

[Mr D]

You only pay VAT once on each transaction. So ebay charging you VAT means they don't charge you additional VAT.
You already pay VAT on relevant services. Just you will become an unpaid tax collector for the UK government when you register for VAT.
https://www.gov.uk/topic/business-tax/vat