Government Consultation on Online Marketplaces

[anonuk]

I’ve just been reading on the government website about the consultation that’s ongoing into forcing online marketplaces to account for the vat on sales instead of the businesses making those sales.

How do you all think this will play out?

We sell quite a bit on Amazon and a lot of our sales are low value items fulfilled by Amazon. Amazon typically ends up with around 60-70% of the sale due to fees and fulfilment costs (which include vat) so then deducting another 20% for the vat would make it impossible to sell.

Do you think the online marketplaces would have to offset the vat charged on their fees when deducting the vat from sales or would it be a case of having to reclaim it from HMRC on vat returns?

I can see this negatively impacting so many businesses.

 

[Paul Kelly ICHYB]

If they are including VAT, why would they deduct another 20%?

Are you registered?

 

[anonuk]

If they are including VAT, why would they deduct another 20%?

Are you registered?

Basically the way I understand it is say I sell an item for £3.99 which is fulfilled by Amazon….currently, Amazon fees and fulfilment including vat costs £2.64 and we receive £1.35. We would normally put the vat to one side, which after accounting for the reclaimed vat on Amazon fees would be 23p.

If the consultation progresses and becomes law, Amazon would also hold back the vat charged on the £3.99 sale, so a further 67p would be deducted from our net payout so we would then only receive 68p instead of £1.35 so in cashflow terms we would be 44p worse off per sale.

Given that we sell hundreds of items at £3.99 per day, we are looking at a significant cashflow reduction if we have to then wait til the next vat return to reclaim all those 44p’s.

I hope that makes sense.