VAT and amazon help?

[silverann]

Hi, am i right in assuming that the selling price of my product on amazon includes vat and i can claim back the vat paid on the charge amazon makes to me for the service so for example on a sale of say £24.10 includes vat 20% (4.82) amazon charges me say £6.03 for this sale, i can add on the proportion of the vat paid on there fee (1.21) and claim it back? any help is much appreciated

 

[David Griffiths]

You can claim VAT charged, provided that it is UK VAT. It's quite possible that Amazon is registered in a different EU jurisdiction, and in that case you can't recover the VAT through your UK tax return

You must give Amazon your UK VAT number and they should then zero rate the supply to you. You have to account for this through the reverse charge mechanism - basically charge yourself output tax (at UK rates) on the net invoice, and recover the same amount as input tax.

 

[silverann]

Hi David, thank you but im still a bit confused i am uk vat registered so i do not get charged any vat from amazon but i do have to pay vat on all sales they make for me from there site. but as they charge me 25% of the sale price im trying to find a way that i am not paying there vat for them. i have heard about the reverse charge but i dont know how that works or how to put that into my books.

 

[David Griffiths]

If you aren't being charged any VAT, what makes you think that you can claim it bacK? :|

You have to account for VAT on your gross sales - that's your VAT not paying Amazon's VAT for them.

 

[silverann]

hi david, on a sale of 24.10 i pay 4.82 in vat, amazon takes 6.03 and i get 18.07 of the sale so the vat ive paid on the sale price includes the amount amazon takes so i am paying 1.21 of vat on amazons fees. this is the amount im talking about. if i can not claim it back it means that on every sale i make i actually pay 26%vat from the amount i get for the sale.
from what i understand using the reverse charge mechanism i can claim back the extra vat i have paid but i dont know how to put this through the books or even if im right or not

 

[silverann]

any views are much appreciated also if anyone also sells on amazon could you please let me know how you account for the vat you have paid on the fees from amazon even thought you are not charged vat from amazon and how you claim this back as im still confused.. lol.. i think im right in saying that using the reverse charge system you can claim back the vat paid on the fees??:|

 

[silverann]

ok just spoke to the tax man and i am correct but still not sure how to add this into the books but will give it a go..

 

[Scalloway]

You need to enter your sales gross, then do a payment for the Amazon charge. The VAT will be taken care of by the payment and the expense will net off against your sale to give you the amount you receive.

 

[silverann]

Thanks scalloway, so im correct in : i put the sale inc vat in and then a payment out for the amazon fee + vat which balances the vat and the actual amount i receive

 

[Scalloway]

That is correct.

 

[David Griffiths]

and then a payment out for the amazon fee + vat which balances the vat and the actual amount i receive

You said above that you didn't get charged any VAT by Amazon.

 

[silverann]

Hi, no i dont get charged any vat but i have to charge vat on the sale price that includes the fee amazon charges me so as to balance out the correct amount i receive and the vat, i need to add on vat to the fee amazon charges me to claim back the extra vat i have paid otherwise i would be paying 27% vat on every sale and not 20% as 25% of every sale price is amazons fee.. if that makes sense.

 

[Anna Chandley]

Hi, no i dont get charged any vat but i have to charge vat on the sale price that includes the fee amazon charges me so as to balance out the correct amount i receive and the vat, i need to add on vat to the fee amazon charges me to claim back the extra vat i have paid otherwise i would be paying 27% vat on every sale and not 20% as 25% of every sale price is amazons fee.. if that makes sense

If Amazon has not charged you UK VAT there is no VAT to reclaim on your fees.

If your VAT inclusive sales price is £24.10 as per your OP then the VAT to be paid over to HMRC is £4.02. VAT is calculated on turnover not turnover less fees charged.

You divide a standard rated VAT inclusive price by 6 to calculate the VAT amount.

Anna

 

[David Griffiths]

Hi, no i dont get charged any vat but i have to charge vat on the sale price that includes the fee amazon charges me so as to balance out the correct amount i receive and the vat, i need to add on vat to the fee amazon charges me to claim back the extra vat i have paid otherwise i would be paying 27% vat on every sale and not 20% as 25% of every sale price is amazons fee.. if that makes sense.

No it doesn't make sense. The fact that you have to increase your price to cover Amazon's cost is not relevant - you still have to account for VAT on the full selling price. That's your VAT, not Amazon's.

That's just the way that it works, like it or not.

 

[silverann]

yes i understand what your saying..
In a normal sale then yes i pay the full vat on the price that the customer pays.
But according to my understanding of tax mans explanation.... when it comes to amazon i can use the reverse charge as amazon takes a fee before the sale is sent to me. so i never see the amount the customer pays only the amount amazon pays me which is 25% less than the customer pays..
So as amazon does not charge me vat and they are not based in the uk it is my responsibility to pay vat on their fee.. as per the reverse charge..
This means that on every sale they make for me i pay the sales tax on that sale but as i only get 75% of that sale it would seem unfair to pay 27% vat so using the reverse charge scheme i can claim back the vat paid on the 25% fee amazon takes thus making my vat 20% on the actual price i receive from the sale...

 

[Anna Chandley]

yes i understand what your saying..
In a normal sale then yes i pay the full vat on the price that the customer pays.
But according to my understanding of tax mans explanation.... when it comes to amazon i can use the reverse charge as amazon takes a fee before the sale is sent to me. so i never see the amount the customer pays only the amount amazon pays me which is 25% less than the customer pays..
So as amazon does not charge me vat and they are not based in the uk it is my responsibility to pay vat on their fee.. as per the reverse charge..
This means that on every sale they make for me i pay the sales tax on that sale but as i only get 75% of that sale it would seem unfair to pay 27% vat so using the reverse charge scheme i can claim back the vat paid on the 25% fee amazon takes thus making my vat 20% on the actual price i receive from the sale...

This is not how the reverse charge works.

When accounting for the reverse charge on the Amazon fee you increase both your output vat (sales) and your input vat (purchases) by the same amount.

So if Amazon charge a fee of £6.03 you increase the VAT on sales by £1.20 and reclaim the same £1.20 as purchase VAT - the effect is VAT neutral for anyone who is not partially exempt. You still need to pay the £4.02 VAT on your sale to HMRC and it is not reduced by the reverse charge.

Anna

 

[David Griffiths]

The reverse charge is completely separate from your sale transaction.

You include the VAT on the reverse charge in box 1, so it's added to your normal output tax

You also include the same amount in box 5, so it's added to your normal input tax.

The overall affect for a fully taxable trader is completely neutral (partially exempt traders may no be able to claim the input tax)

So if your Amazon supplies subject to reverse charge are £100, there's £20 in box 1 and £20 in box for and nothing extra in box 5

 

[silverann]

oh ok so i still have to pay effectively 27% vat on the amount i get for the sale.. as on a sale of £24.10 (inc 4.10 postage) via amazon etc, i only get £18.07 (including 4.10 postage) .. out of the 18.07 i have to pay 4.82 in vat.. even though 1.21 of that vat is due to the 6.03 amazon charge ?
now im confused again as the phone call to the tax office said i could claim back the proportion of the vat made up by the amazon fee

 

[David Griffiths]

Telephone advice from the VAT office isn't worth the paper that it's written on.

 

[silverann]

Thanks David, i did have a tax inspection a couple of weeks ago and thats the person i called as its to do with the vat charged on sales via 3rd party sellers like amazon in the past i have paid vat on all income from sales but not on the amount they charge the customer for the sale this is where im getting confused as if i pay the vat from the amount the amazon customer pays i will be paying more that 27% on the income of those sales... as amazon customers are not my customers and i have no control over the transactions..i have always thought of amazon as my customer so pay vat accordingly.. but now i know i have to pay the vat on the price amazon charges the customer it just seems unfair im paying vat on an amount i do not get.. and is making me wonder if there is any point to selling through 3rd parties if im going to have to pay vat on there charges which is effectively what i would be doing

 

[Torent5]

in my opinion

we count vat on total money recived from amazon as our income
amazon is on 15% luxemburg VAT
we count back this 15% on their fees and count it agains what we have to pay

is it right?

 

[SuffolkDesigns]

in my opinion

we count vat on total money recived from amazon as our income

Surely the total sales price is the income that includes VAT & the amazon fees are a business expense

 

[Scalloway]

Surely the total sales price is the income that includes VAT & the amazon fees are a business expense

You are correct.

 

[dtc]

Thanks David, i did have a tax inspection a couple of weeks ago and thats the person i called as its to do with the vat charged on sales via 3rd party sellers like amazon in the past i have paid vat on all income from sales but not on the amount they charge the customer for the sale this is where im getting confused as if i pay the vat from the amount the amazon customer pays i will be paying more that 27% on the income of those sales... as amazon customers are not my customers and i have no control over the transactions..i have always thought of amazon as my customer so pay vat accordingly.. but now i know i have to pay the vat on the price amazon charges the customer it just seems unfair im paying vat on an amount i do not get.. and is making me wonder if there is any point to selling through 3rd parties if im going to have to pay vat on there charges which is effectively what i would be doing

Sorry I don't think you are listening to what people are saying. You aren't paying 27%, you are paying the 20% the customer paid, same as on a sale through your website to a UK customer or whatever. Any reverse charge goes on both the input and output in equal amounts so it is just a statistical thing to allow hmrc to track whatever.

For the 20% I take the net amount I receive from Amazon and add on an amount equivalent to their invoiced fee - this goes in as the total sale if you like. As this is the amount of the sale, the price the customer paid, the VAT you pay over is the usual, £4.00 out of £24.00 say. £4 VAT, £20 to you.

The reverse charge is on their invoiced fee, and is the same amount in and out. It costs you nothing but the aggravation of having to do it and collude in their tax dodging (but that's another argument!)

Darren

Sent from my GT-I9300 using Tapatalk 2

 

[SuffolkDesigns]

From what I can gather and if I have understood the OP correctly, the OP thinks that because the Amazon fee is a % of the total sales price that they should be able to reclaim part of the fee as 'VAT' as the Amazon fee was also charged on the VAT portion of the sales price.

If this is the case, the answer is that you cannot claim back any part of the fee as VAT (unless the invoice for the fee clearly shows UK VAT), even if it was charged on the total sales price of your item.

 

[silverann]

DTC i am listening to what people are saying but if you do the calculations your self then i am paying alot more vat than i should on money received. for example i sell an item via amazon at £24 out of that i pay £4.80 vat.. Amazon takes 25% so they take £6.. i get in my account £18 so with that 18 i have to pay £4.80 vat.. thus making the vat on what i receive 26% ish as amazon do not charge me vat i can not claim vat.. the reason i was on here was to ask if there was a way around having to pay so much in vat, as i always thought vat was on what you receive.. not on what the customer pays as i see amazon as my customer as they are the ones that pay me but Mr tax man said i cant do that..

 

[Scalloway]

Amazon are just acting as an intermediary to get your goods to market. Their income is the commission they charge you for the privelege.

 

[silverann]

i know scalloway, it is unfair but thats life.. although my argument is still the same the people who shop through amazon are amazons customers as i do not have contact details or transaction input.. so i see it the same as if i was a dropship company or even the same as selling though reps.. and i should pay vat on what income i get not on what my products are sold for... but that is my opinion.

 

[SuffolkDesigns]

for example i sell an item via amazon at £24 out of that i pay £4.80 vat.. Amazon takes 25% so they take £6.. i get in my account £18 so with that 18 i have to pay £4.80 vat.. thus making the vat on what i receive 26% ish as amazon do not charge me vat i can not claim vat..

The VAT on a £24 sale is £4, not £4.80

It doesn't matter what you receive after Amazon deduct their fees, the VAT is still £4 on of a £24 sale.

 

[dtc]

silverann, I don't know what advice you have taken from HMRC - I also rang about this years ago and they knew nothing. Sounds like nothing has changed.

Amazon give you the money net of their fee. Forget their fee when considering the VAT. For my £24 example, the elements to consider are as follows:

£24 - total sale

£6 - Amazon's 25% fee, which is tax deductible, and you report via Reverse Charge

£18 - net you receive

The sale goes on your accounts as £20 + £4 VAT at 20%. You keep the £20, send the £4 to HMRC.

You end up with £14: the £20 of the sale - Amazon's fee of £6.

It's cr*p, yes - they likely make more than you do. And there is no VAT to reclaim on the fee, though the fee is tax deductible and is therefore more like £4.80.

But you still pay 20% VAT on the total sale. The reverse charge is as I said - costs you nothing.

Darren