There’s been some discussion in eBay circles on whether marketplaces such as eBay and Amazon correctly charged VAT on fees to businesses in the past.
The argument goes “According to B2B VAT cross border legislation there should have been no VAT application on eBay and Amazon fees going back as far as the business contract was signed”. Sellers are saying that If a UTR (Unique Taxpayer Reference) & letter confirming business registration is provided that should suffice, but eBay have only ever considered a VAT registration number as evidence for charging fees net of VAT.
The subject has only arisen since eBay stopped charging VAT on fees at the beginning of the year. Sellers are also mooting that the same applies to Amazon and are suggesting that VAT should never have been charged on Amazon fees either.
The tricky part however is that up until this year it doesn’t really matter what HMRC say, as eBay have for many years been charging Luxembourg VAT and thus were subject to the laws of that country. Remember that the UK is in a unique position having a VAT threshold beneath which businesses need not register and collect VAT, that’s different to most of the EU where all businesses register and collect VAT. With no de minimus threshold for the rest of the EU, all businesses would have VAT numbers so it’s reasonable that that’s the evidence Luxembourg required.
It’s only since the beginning of the year that EU legislation changed the way VAT is charged on electronically supplied services (which includes eBay fees). From the 1st January 2015 VAT is applied based on the country the customer is located, rather than where the supplier is headquartered, thus for the UK bringing it within the remit of HMRC, as eBay explain in the following statement supplied to Tamebay:
eBay complies fully with all tax laws in the jurisdictions in which it operates. Up to 31 December 2014, the fees eBay charged sellers were subject to the VAT rules applicable in Luxembourg. The Luxembourg Tax Administration position is clear – they will only accept a valid VAT ID as evidence of business status.
This means that for sellers in Luxembourg and most EU Member States, eBay is obliged to collect VAT if we do not have a valid VAT ID on file for the sellers. In the UK however, it is possible to use alternative evidence and we have confirmed this with HMRC. This means that from 1 January 2015 we are no longer required to collect VAT on fees to small businesses.