VAT on eBay fees: how it shows on your invoice, when you can reclaim it and how to price for it

Does eBay charge VAT on fees?

VAT on eBay fees is a question every UK business seller meets on their first monthly invoice. eBay's fees are a service eBay supplies to you, and for UK-based sellers your eBay invoice shows the fees you were charged together with any VAT on them. How VAT is shown, and at what rate, depends on where your business is established and the details on your account, so your own invoice is the document that matters.

Fees are easy to overlook because eBay takes them from your sales before paying you, so they never leave your bank account as a separate payment. That is exactly why the VAT on them is so often missed, both by sellers who could reclaim it and by sellers who forget to price for it.

What VAT on fees costs you depends on one thing: whether you are registered for VAT. If you are, VAT on eBay fees is usually input tax you can reclaim. If you are not, it is a cost of selling like the fee itself.

This guide explains the general rules. It is not tax advice, so check your own situation with HMRC or a qualified accountant.

Where does VAT on eBay fees show up?

eBay produces a monthly invoice and fee reports in your account. They list the fees charged that month, such as final value fees, listing fees, optional upgrades, shop subscriptions and promoted listings fees, along with VAT where it applies.

What to check on each invoice

• The VAT line. Whether VAT has been added to your fees, and how much.
• Your details. Your business name and address, and your VAT number if you have given it to eBay.
• eBay's details. The eBay company that issued the invoice and its VAT number.
• The period. Which month the fees relate to, so they go in the right VAT period.

Fees are usually taken from your sales before eBay pays you, so you never see them as a separate payment from your bank. That makes the invoice even more important: it is the only clear record of what you paid and how much of it was VAT. Our guide to record keeping for eBay sellers shows how to match payouts with fees.

Can you reclaim VAT on eBay fees?

If you are registered for VAT, you can usually reclaim VAT you pay on goods and services you use for your business, which is called input tax. eBay fees are a business cost for a business seller, so VAT on them is usually reclaimable on your VAT return. gov.uk explains the general rules on reclaiming VAT.

To reclaim, you need valid evidence, which for eBay fees is the invoice. Keep each one, and claim the VAT in the period the invoice relates to. If you sell both business stock and personal items on one account, only the business share of the fees is a business cost, which is one more reason to keep personal sales off your business account.

If you are not registered for VAT, you cannot reclaim any VAT, including VAT on eBay fees. The full amount, fee plus VAT, is your cost. Registration is required once your VAT taxable turnover for the last 12 months goes over £90,000, or if you expect it to go over £90,000 in the next 30 days alone, as set out on gov.uk's page on when to register.

How does VAT on fees change your real selling cost?

The fee rate on eBay's fees page is not always the whole cost. Whether you can reclaim VAT on top decides what you really pay.

A worked example

Example: suppose a hypothetical seller has £400.00 of eBay fees in a month, and the invoice adds £80.00 of VAT. These figures are invented for the arithmetic; check gov.uk's VAT rates and your own invoice for real amounts.

In this example the seller who is not registered pays a fifth more for the same fees. If their prices were set using the fee rate alone, every sale would make a little less than they planned. Over a year that gap can be the difference between a product that pays and one that does not.

The registered seller gets the VAT on fees back, but charges VAT on standard-rated sales, so their pricing changes in other ways. Our guide to the VAT threshold for eBay sellers covers what changes on registration.

How should you price for VAT on eBay fees?

The rule is to price with the fee cost you actually bear. That means:

1. Find your effective fee rate. Take a few months of invoices and divide total fees, including VAT if you cannot reclaim it, by total sales. This shows what eBay really costs you as a share of sales.
2. Include all fee types. Add promoted listings fees, shop subscriptions and upgrades, not just final value fees.
3. Use the rate in your pricing formula. Build it into the price so the fee is covered on every sale, not just on average.
4. Re-check after any change. A new category, a change in your VAT status or a fee change on eBay's side all move the figure.

If you use a repricing tool, check how it treats fees. Dropizon, for example, grosses eBay fees up into the price using the fee settings in your formula, so the setting should reflect what you really pay, including VAT on fees if you cannot reclaim it. The Dropizon documentation explains the pricing formula.

How do you account for eBay fees on a VAT return?

For a VAT-registered seller, the steps each period are usually:

• download the eBay invoices for the months in the VAT period;
• record the fees as a business expense, net of VAT;
• record the VAT on fees as input tax in your bookkeeping software;
• keep the invoices with your VAT records, as you would supplier invoices.

VAT returns are filed through software under Making Tax Digital for VAT. Most bookkeeping software lets you attach the invoice to the transaction, which keeps the evidence and the figure together. HMRC's guide on record keeping for VAT sets out what records you must keep.

When fees come from other platforms too

If you also sell on Amazon, Etsy or your own site, treat their fees the same way: download each invoice, check how VAT is shown, and record it in the right period. Fees from platforms based outside the UK can be treated differently for VAT, for example under the reverse charge, so ask your accountant how to record any fee invoice that does not show UK VAT.

What mistakes do sellers make with VAT on eBay fees?

The same few errors come up again and again. Each one is easy to avoid once you know it.

• Recording only the net payout. If you record the money that reaches your bank as your income, the fees and the VAT on them disappear from your records, and you cannot reclaim what you cannot see.
• Reclaiming VAT before you are registered. Only VAT-registered businesses can reclaim input tax on a VAT return. Until then, VAT on fees is a cost.
• Forgetting promoted listings fees. These can be a large share of your total fees, and they appear on the invoice like any other fee.
• Claiming VAT on fees for personal sales. Fees on items you sold as a private person are not a business cost.
• Pricing from the headline rate. The rate on eBay's fees page is a starting point. Your real cost includes upgrades, subscriptions, promoted fees and, if you cannot reclaim it, VAT.
• Losing invoices. Without the invoice, you have no evidence for the VAT you reclaim. Download it every month.

A short monthly habit, downloading the invoice and recording fees and VAT separately, prevents all six.

A quick checklist

• Download every monthly eBay invoice and save it with that month's records.
• Check how VAT is shown on your fees and that your business details are correct.
• If you are VAT registered, reclaim VAT on business fees in the right period.
• If you are not, treat fee plus VAT as your real cost.
• Work out your effective fee rate from real invoices and use it in your prices.
• Ask an accountant about any fee invoice you are unsure how to record.