VAT already deducted from Amazon fees - how do I show this on Sage

[Katy1980]

Hi all!

My query is: Amazon (and eBay I believe) are based in Luxembourg. Therefore, because I am UK VAT registered - and have given them my VAT number - they deduct VAT from their fees.

So, if I sell an item for £10, Amazon would usually take 28.75% commission/referal fee, however, because I'm VAT registered they take only 25% (which is 15% less than the 28.75% as that is luxembourg's current VAT rate). So the commission/referal fee would be £2.50.

My question is, how would I post this fee on Sage? I have created a code (5106 - Amazon Fees) - would I post the payment there as £2.50 Net, VAT code T1, and VAT amount £0.00 (as the VAT has already been deducted)? Or perhaps I'm talking nonsense and there is another way?

Any help would be greatly appreciated.

Thank you

 

[David Griffiths]

The purchases from Amazon are subject to the reverse charge mechanism. You need to enter this with the correct tax code, which could be T8, depending on how your system is set up. The code should have a rate of 0% but be flagged as a standard rate purchase from an EC supplier.

That means that you post the deduction as 2.50 code T8 VAT 0.00

When you run your VAT return the system should do two things

1 Add 2.50 to your outputs in box 6 and 44p output tax to your figure in box 2

and

2 Add 2.50 to your value in box 9 - acquisitions from EC member states (and your box 7 figure) and 0.44 to your input tax claim in box 4

If you make only taxable supplies then the input tax and output tax balance, so there is nothing to pay or receive. However, and this is the point of the reverse charge, if you are partially exempt then you might not be able to recover the input tax in full and end up paying the output tax.

Who said tax didn't have to be taxing!

 

[Katy1980]

Thank you very much, that's really helpful.

I did not understand the last paragraph.... or if it applies to me? I am on the standard VAT rate (not the flat rate) - so does that mean the 44p VAT will be deducted and reclaimed on my VAT return (hence I effectively do not pay the 44p?)

 

[David Griffiths]

Thank you very much, that's really helpful.

I did not understand the last paragraph.... or if it applies to me? I am on the standard VAT rate (not the flat rate) - so does that mean the 44p VAT will be deducted and reclaimed on my VAT return (hence I effectively do not pay the 44p?)

That's right. It's added to both input tax and output tax. It should be automatic.

 

[Katy1980]

Hmmm, there's a few returns where I've not used "T8". I realise to do it from now on, but do you think I need to let them know, or is it not really a big deal (as the VAT due is not affected...)? I'm guessing that it's more a statistical issue - and that I should just make sure I use T8 from now on... or should I let them know...? Sorry, that's my last question :redface:

 

[David Griffiths]

There's no loss to HMRC (or to you) so I'd just get it right in future. There's nothing to correct in terms of net VAT due.

I'd defer to the superior knowledge of any of our VAT experts who thinks differently.