Fruugo VAT notification impacts past and future transactions

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A Fruugo VAT notification sent to merchants warns of some VAT billing changes which might result in an additional amount of VAT due on past and future invoices. For sellers who are VAT registered on standard VAT schemes this should be merely an accounting exercise with the merchant being charge VAT and then claiming it back from HM Revenue on their next VAT return.

The Fruugo VAT notification explains that during a routine and independent Tax and VAT audit, it has been determined that Fruugo should charge VAT on FX (foreign exchange) income, both past and present, to its UK retailers for sales in countries where Fruugo has not already remitted the full amount of VAT to the relevant authority as an Online Marketplace.

For orders dated from the 1st of November 2021 , invoices will include VAT on FX income on orders between UK retailers and non-UK shoppers in countries where Online Marketplace VAT has not yet been introduced. This VAT can be recovered in the same way as the VAT charged on Fruugo’s commission and funds processing fee, which should mean there is no overall cash impact to you.

Following the Tax and VAT audit, Fruugo is also required to send retrospective VAT only invoices to its UK retailers for VAT chargeable on FX income received by Fruugo over the past four years. The invoice is attached and dated 31st October 2021. This is VAT only and the full amount of the invoice can be treated as input VAT and reclaimed in full from HMRC on your relevant VAT return.

Although the net cash impact to Fruugo’s retailers is zero, Fruugo wants to ensure its retailers are not temporarily out of funds. As such, the VAT only invoice is not due for payment until 15th February 2022. This should mean all retailers will have received the cash benefit of the input VAT from HMRC before paying the matching amount to Fruugo.

Retailers can pay the invoice directly to Fruugo at any time before 15th February 2022 or leave it unpaid in which case Fruugo will deduct the invoice amount from the next available weekly payment run(s) after 15th February 2022.

There are a few cases where merchants may end up with an unexpected VAT bill that they are unable to reclaim. This may be the case if you are not VAT registered or if you are on certain special VAT schemes such as the Flat Rate scheme were you are unable to reclaim input VAT. It will also result in a VAT bill that you can’t reclaim if you were previously VAT registered but have subsequently de-registered for VAT.

If you have any queries on the Fruugo VAT notification, the marketplace has set up a special email address – [email protected]

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