eBay business no profits once vat registered

[Keeleys store]

Hello
I am new to posting on forums but I could really use some help,
I but from China - mainly Ali express and sell my items for a small profit on eBay after eBay, PayPal fees and postage.

I think I'm going to hit the vat threshold this year , and I'm just wondering how I'm meant to pay out another 20% vat out of my profits?

Also some parcels I get in don't have vat on so how can I claim that back?

Very worried and totally confused

Look forward to any replies

Thanks K

 

[finleydesign]

Umm you charge an extra 20% on to your products

 

[Keeleys store]

With eBay it's too competitive to do that as Chinese sellers flood our market with cheaper prices than us already,

 

[finleydesign]

You don't really have an option, if VAT registered you would need to charge VAT, don't forget though you pay the difference between sales and purchases, not a whole 20% on your sales

 

[TMGG]

If some of the parcels coming in don't have VAT then there is nothing to claim back. But are these items classified as zero rated/exempt or because the Chinese supplier puts a fake low invoice on the parcel?

 

[YesMan]

If your turnover is below 150k you can apply for the flat rate scheme and only pay 7.5% VAT - but you can't claim VAT back on purchases

 

[antropy]

Could be even less than 7.5% depending on what you sell: https://www.gov.uk/vat-flat-rate-scheme/vat-flat-rates
https://www.gov.uk/vat-flat-rate-scheme/vat-flat-rates

 

[japancool]

Essentially, all that will happen is that your profit will be 16.67% lower than it is now.

So if you were making £120 profit before, after all the fees have been taken into account, you will be making £100 now, more or less.

eBay's final value fees have VAT on them, so you reclaim that.

If your business is built around not paying the correct VAT on your imports though, then you have a problem.

 

[jjscruff]

flat rate, always flat rate especially if importing goods with low value

 

[YesMan]

Could be even less than 7.5% depending on what you sell:
emoved link as new member!

True - I presumed OP would be registering under 'Retailing not listed elsewhere' as the other categories available are not common for eBay businesses!

I believe you also get a 'discount' on your first year.. so could be lower even.

Under this scheme, you could get away with raising prices only by 7.5% (or your respective flat rate percentage) and continue doing business in the same way as you are now. You do however, still have to charge 20% VAT to all customers, so if you can afford to increase by 20%, you will take the extra 12.5% as profit.

 

[silvermusic]

Importing stuff from China to resell on ebay against the Chinese sellers evading VAT is only going to end in one result, a lot of work for little if any profit. You need a serious re-think of your business before it's too late.

 

[Thomas Royle]

@silvermusic I don't agree with that. You can have a very profitable small business from doing this. You're not necessarily going against the chinese resellers you just need to express that you are in the UK and offer a much better service. Many consumers would rather pay extra to have products that are housed in the UK.

 

[Pish_Pash]

I totally agree with silvermusic...there's not a cat in hells chance of spinning a profit by being legit fighting chinese sellers by selling chinese sourced products.....

How about not selling so much, stay below the VAT threshold (& no doubt staying with the likely present 'creatively valued' invoice from you supplier thereby incurring little import VAT)....being VAT registered is a killer *unless* you punch through that level & grow quickly thereby pulling away from it.

 

[SamStones]

eBay's final value fees have VAT on them, so you reclaim that.
.

Is that correct? Is it 20% UK vat now? I know it used to be 15% Luxembourg VAT but thought it changed?

 

[japancool]

Is that correct? Is it 20% UK vat now? I know it used to be 15% Luxembourg VAT but thought it changed?

Yes - the VAT charged is based on the seller's location.

 

[silvermusic]

Yes - the VAT charged is based on the seller's location.

If you're not VAT registered, as I'm not, then currently there's no VAT on eBay fees, strange but true from January this year.

 

[silvermusic]

@silvermusic I don't agree with that. You can have a very profitable small business from doing this. You're not necessarily going against the chinese resellers you just need to express that you are in the UK and offer a much better service. Many consumers would rather pay extra to have products that are housed in the UK.

Even as recently as 2 or 3 years ago I may have agreed with that to some degree. However, times have changed dramatically over the last few years. Even ignoring things like VAT avoidance, under-declaring goods value on import, etc. Many Chinese sellers are shipping goods from UK destinations, your advantage has gone. As I've said before, on commodity products eBay buyers in particular are price whores and the cheapest wins. Trying to be 100% legal, decent and honest against such sellers is a battle you can not win. Sure I've seen plenty try and plenty go bust as well. It's not a workable profitable business model on eBay or Amazon, you'd even struggle on your own site without the volume of traffic those two generate, as it's all about volume.

 

[Ed B]

Yep - differentiating your offering (better return policy, security of buying from UK, faster postage) etc is one useful way forward here. Or different products selection; see sig although really aimed at Amazon sellers for now

 

[Pish_Pash]

Yep - differentiating your offering (better return policy, security of buying from UK, faster postage) etc is one useful way forward here. Or different products selection; see sig although really aimed at Amazon sellers for now

Or even go a bit further & emphasize your full native English speaking support , faster dispatch (not just faster postage)...if you wanna play low ball underscore the point that your goods are legitmate/authorised which infers that by buying from overseas sellers buyers may end up with 'B' or graded stock!