This document provides an overview of VAT (Value Added Tax) for ecommerce and online businesses. It discusses the basics of VAT including how it is calculated at 20% of sales price and divided by 6. It also covers different VAT schemes businesses can register for, including the Standard Scheme, Flat Rate Scheme, and Annual Scheme. The document notes upcoming changes to VAT law taking effect in April 2019, and provides examples of zero rated goods and how VAT applies to drop shippers based on place of supply. The presentation aims to explain the key concepts ecommerce businesses need to know about VAT.

1. VAT: The basics and beyond
What Ecommerce and Online businesses need to know about VAT
Presented by: Joseph Cox ACCA

2. Who are we?
• Accountants and business advisors
• Based in London (Old Street)
• Specialists in Ecommerce
• Work with over 200 businesses

3. Who am I?
• Joseph Cox
• UK Charted Accountant
• Amazon Seller (Since 2012)
• My favourite tax is… VAT!

4. VAT: The biggest problem for
accountants and ecommerce
Why are we talking about VAT?

5. What makes VAT so
confusing?
• Distance Sales
• Place of Supply
• Upcoming Law Changes: MTD
• Digital Services

6. VAT: The Basics
What is VAT?
• Value Added Tax
• Tax on sales price (rather than profit!)
• Introduced in 1973 and is the third largest source of government revenue
• It is an indirect form of tax
• It is regressive as poorer people spend a higher proportion of their disposable income on
VAT than richer people

7. VAT: The basics
• Currently 20%
• E.g. Sales price = £10 + VAT then VAT = £2
• How do you calculate your VAT if you only know your selling price?
E.g. Selling price is £10…How much of this is VAT?

8. VAT: The basics
•Divide by 6!
• E.g. Sales price = £10 10/6 = £1.67
£10 – £1.67 = £8.33 £8.33 * 20% = £1.67

9. VAT: The basics
• How is VAT Calculated?
• Input Tax (Sales)
• Output Tax (Purchases)
• Inputs – Outputs = Liability (or rebate!)

10. VAT: The basics
• When do I need to register!?
• Overseas businesses vs UK businesses
• Voluntary registration
• Distance Sales

11. VAT: The basics
• How frequently do you need to file your VAT return?
• When is VAT due?
• How to pay VAT?

12. VAT: The basics
• How to register?
• When is VAT due?
• How to pay VAT?

13. EU VAT: Basics
• When to register?
• Goods Stored (“Nexus”)
• What are distance sales?

14. VAT Schemes
What are the different schemes?

15. VAT: VAT Schemes
• Standard Scheme
• Flat Rate Scheme
• Annual Scheme
• Marginal Scheme

16. VAT: Standard Scheme
• Input VAT minus Output VAT = VAT Liability (or asset!)
• Benefits:
+ You get to reclaim VAT on purchases
• Cons:
- You lose 1/6th of your sales margin on marketplaces
- It can be a headache to manage

17. VAT: Standard Scheme
• Example:
Sales of £83.33 plus £16.67 VAT (100/6 = £16.66)
Purchases of £30 including VAT (30/6 = £5)
£16.66 minus £5 = £11.66 due to HMRC

18. VAT: Flat Rate Scheme
• You can join the scheme if your turnover is below £130,000
• You pay a percentage of your gross sales
• Online retail percentage is 7.5%
• First year get 1% discount

19. VAT: Flat Rate Scheme
Example:
£100 including VAT of Sales (Gross)
£30 including VAT (cannot be reclaimed)
£100 multiplied by 7.5% rate = £7.50 VAT due to HMRC

20. VAT: Beyond
• Up coming law change: 1st April 2019 – Making Tax Digital
• Zero Rated Goods: https://www.gov.uk/guidance/rates-of-vat-on-
different-goods-and-services
Ecommerce Examples: Coffee, Babywear, Safety Equipment
• VAT for Drop Shippers – Place of Supply = No VAT

21. Questions?
Find out more: EcommerceAccountants.co.uk/book-appointment