How to reclaim VAT on supplier invoices as an eBay seller

Can you reclaim VAT on supplier invoices as an eBay seller?

Yes, if your business is VAT registered. To reclaim VAT on supplier invoices you need three things: you are registered for VAT, the purchase was for your business, and you hold a valid VAT invoice from the supplier. If any of the three is missing, you generally cannot claim the VAT back, however much VAT you paid.

VAT is a tax added to most goods and services. Once you are registered, you charge it on your sales (called output VAT) and you can usually reclaim the VAT your suppliers charged you (called input VAT). On each VAT return you pay HMRC the difference, or claim a refund if your input VAT is higher than your output VAT.

Registration is compulsory once you pass a limit. A UK business must register for VAT if its VAT taxable turnover for the last 12 months goes over £90,000, or if it expects taxable turnover to go over £90,000 in the next 30 days alone. You can check the rule on the gov.uk page on when to register for VAT, and our guide to the VAT threshold for eBay sellers shows how to track it.

If you are not registered, you cannot reclaim VAT. The VAT your suppliers charge you is then simply part of your cost, and you should price your eBay listings with that in mind.

This article explains the general rules. Check your own situation with HMRC or a qualified accountant before you rely on it for a claim.

What counts as a valid VAT invoice?

A VAT invoice is a document from a VAT-registered supplier that shows the VAT charged on a sale. HMRC sets out what it must contain in its VAT record keeping guidance. A full VAT invoice normally shows:

• The supplier's name and address.
• The supplier's VAT registration number.
• A unique invoice number.
• The invoice date, and the date of supply if it is different.
• Your business name and address as the customer.
• A description of the goods or services, with quantities and prices.
• The VAT rate and the amount of VAT charged.
• The total payable.

Requirements can differ for simplified or modified invoices and for special situations, so read the current guidance on gov.uk rather than relying on a list from memory, including this one.

A quick invoice check

Run each supplier invoice through the same short check before you record it. The table shows what to look for and why it matters.

What if a supplier document is not a valid VAT invoice?

Do not reclaim VAT on it. Ask the supplier for a proper VAT invoice or a corrected one. Many documents look official but do not do the job.

These usually do not support a VAT claim on their own:

• Order confirmation emails and delivery notes.
• Pro forma invoices, which are requests for payment before the sale is complete.
• Card receipts, bank statements and PayPal or payment-app records.
• Invoices that show VAT but give no supplier VAT number.
• Invoices from a supplier who is not VAT registered, even if a VAT line appears on them.

Payment records are still useful as proof that you paid, so keep them next to the invoice. They just do not replace it.

If an invoice is made out to your personal name instead of your business, or has the wrong address or a missing detail, ask the supplier to reissue it. It is far easier to fix at the time of purchase than months later, when the supplier may be slow to answer or have closed the account.

Which purchases can you reclaim VAT on?

In general you can reclaim VAT on goods and services you buy for your business, where the supplier charged VAT. For an eBay seller that usually covers:

• Stock you buy to resell.
• Packaging, labels and postage supplies.
• Software subscriptions and tools used in the business.
• Equipment such as a label printer or shelving.
• Business fees where VAT appears on the invoice, including eBay's own fee invoices. Our guide to VAT on eBay fees explains how that shows up and how to price for it.

Several limits apply, and you should check each against the gov.uk guidance on reclaiming VAT:

• If an item is used partly for business and partly privately, you can only reclaim the business share.
• Some categories are restricted, such as business entertainment.
• If you use the Flat Rate Scheme, you generally do not reclaim VAT on most purchases, with limited exceptions.
• Goods you import from outside the UK come with their own import VAT paperwork rather than a normal supplier invoice.
• There are time limits on how far back you can claim, so do not leave invoices sitting in a drawer.

How do you record and claim the VAT?

Follow the same routine for every invoice, so nothing is missed when the return is due.

1. Get the invoice when you buy. Ask for a VAT invoice in your business name at the time of purchase, not afterwards.
2. Check it. Use the table above: supplier VAT number, invoice number, date, your business details, and VAT shown separately.
3. Keep a copy. A clear digital copy stored with your other business records is usually enough. Name files so you can find them, for example by date and supplier.
4. Record the amounts. Enter the net amount, the VAT and the total in your books, with the invoice number.
5. Claim on the right return. Include the input VAT on the VAT return for the period it belongs to, under the accounting scheme you use.

Our guide to record keeping for eBay sellers has a simple monthly routine you can use for this.

Worked example

Example (hypothetical numbers, not a real rate or real data): suppose you buy stock from a VAT-registered wholesaler. The invoice shows £200.00 net, £40.00 VAT and £240.00 total, with the supplier's VAT number and your business name on it. In the same VAT period you sell that stock and charge £100.00 of output VAT on your sales.

On your VAT return you can reclaim the £40.00 of input VAT. You pay HMRC £100.00 minus £40.00, which is £60.00. If the invoice had no VAT number, you would not claim the £40.00, and you would pay £100.00 on this example while treating the £40.00 as a cost.

What about Amazon and other retailers as suppliers?

Be clear about eBay's rules first. eBay allows dropshipping where you fulfil orders directly from a wholesale supplier. Listing an item on eBay and then buying it from another retailer or marketplace that ships directly to your buyer is not allowed. Whatever your sourcing, you stay responsible for safe delivery within the time stated in the listing and for the buyer's overall satisfaction. Read eBay's drop shipping policy before you decide how to source.

For VAT, the question is simply who sold you the goods and whether they gave you a valid VAT invoice. A retail purchase does not automatically come with one that you can claim on. When the seller is a third party, the invoice comes from that seller, and it only counts if that seller is VAT registered and the document shows the details above.

Every Amazon purchase is made under Amazon's own Conditions of Use and Sale, so read them. Then check each order's invoice individually instead of assuming it is claimable.

If you use Dropizon, the extension can fill the Amazon checkout in your own Amazon account, and you confirm the order yourself. The orders then sit in that account's order history, which is where you would look for invoices. Dropizon does not do your VAT bookkeeping, so keep your own records. You can read more about the workflow on the how Dropizon works page.

A quick checklist for supplier invoices

• Confirm your VAT registration status before you claim anything.
• Ask for a VAT invoice in your business name every time you buy.
• Check the supplier VAT number, invoice number, date and VAT amount on each one.
• Do not claim on order confirmations, card receipts or pro forma invoices.
• Ask suppliers to correct errors straight away.
• Store a digital copy and record net, VAT and total in your books.
• Claim only the business share of mixed-use purchases.
• Check time limits and scheme rules on gov.uk, and ask an accountant about anything unusual.