Vat Number Required but under threshold

[arny51]

Hi all,

Last year in May 2023 I received an email from eBay telling me I needed to provide a VAT number as I'd breached the £85,000 threshold and if I didn't I would have my account restricted. 

Following a long 4 months I managed to have HMRC grant me and exception on 29th September after which the UK business compliance team granted me a temporary 12 month removal of restriction  as opposed to a full removal. 

Fast forward to this year exactly a year to the day it was removed I received the same email albeit the email cited the new £90,000 threshold. This year though, my rolling 12 month turnover is under the £90,000 threshold (83k rounded) but my account is still suggesting that it will be restricted on October 30th.

Unfortunately I've been struggling with getting replies from the compliance team, I've since emailed  HMRC with my figures and forecast since my exception was granted and they have replied by post that I do not need to be applying for an exception or be registed for VAT yet I seem to still be in this predicament.

Every advisor I speak to tells me wrong information, one told me ALL business accounts legally have to have a VAT number and she claimed to be from the specialist team too. A check of eBay policy dispels this myth. A further advisor said it's not eBay chasing me but in fact HMRC are chasing them because they accumulate all accounts and platforms I sell on which is not true and HMRC confirmed it not to be true, baring in mind my only account I sell on is this and I don't use any other platform.

I am currently at a loss as to what to do and any help would be appreciated.

Thanks 

Arny51

[dantiques01]

how did you get on with this, im in exactly the same problem, received email stating i need to apply for a vat number otherwise my account will be blocked in 30 days, yet my sales show i received the email as soon as i went over 85k, phoned ebay, they did multiple date checks and agreed id not gone over 90k, and they would forward to payments department, they eventually replied also agreeing id not gone over 90k but i still need to apply for a vat number, my account cant see where to apply for the exemption one needed, any ideas how to get this? i also had several other ebay reps all giving incorrect info as well, such as saying all ebayers will receive this email who have changed fromprivate to business seller in last 12 months, which is irrelevant as ive been a business seller for 15 years, another one told me vat threshold is 85k and thats why i got the email as ive just gone over 85k, now a business compliance team on ebay are supposdly looking into it, they said unpaid items, and refunded items should be added on to my turnover which im sure is incorrect, what if you sold rolex watches and you sold 9 or 10 at 10k each and had to refund on every one, so your actual sales were zero yet according to ebay youve made over 90k so you have to apply for vat number, its bad enouh that postage and now the customs taxes ebay take are all added on to your turnover. any help much appreciated as ive had 3 weeks of stress and sleepless nights over this. thank you

[therenewalworkshopltd]

Actually, if you had sold your 10 rolex watches and then subsequently refunded them, you would indeed have turned over 100k and would have to register.

Every sale is included within your turnover unless they are voided.  Which is a different thing entirely.

But if you are that close the threshold, is not just easier to register and avoid all of the messing about with Ebay.  Especially as it's likely that they will suspend you if they don't agree with you.  

Vat is not as expensive as people seem to perceive.   It is not an extra 20% that you have to pay.  You deduct your purchase VAT from this.   And it is not actually paid by the seller, but by the end customer.

Along with the fact, that on your first return, you are very likely to receive a fairly decent refund.

I would advise that you speak to an accountant.

[dantiques01]

thank you, i sell secondhand items, i was vat registered on ebay previously for over 10 years and i always found it a nightmare, i never claimed any vat back from the buyers? first few years i was on a flat rate scheme of 7.5 percent or similar which i was charged on my turnover, so sometimes this could be 7k-8k every quarter, i ended up having to get credit cards to pay the vat bills, then i changed accountants and they told me id been on the wrong scheme and i was changed to a margin scheme where i paid vat on my profit, i still found it all very confusing and it still baffles me now...at one time i was also paying a book keeper £150 a week to do my paperwork, then another accountant to do my vat returns and tax returns, so some years i was running at a loss, as its hard enough making a profit on antiques and collectables as it is. but thank you for your reply

[therenewalworkshopltd]

I get what you mean, but it really isn't that complicated at all.

£150 a week for a bookkeeper?  That's a hell of a lot.

I do all my accounts myself, but I have it automated.  It's literally check over once a week and make sure everything is matched off.

No, you don't get a refund from your buyers when you first register.

What happens, is that you look at the all the stock that you have purchased within the prior period (6 months I think, but not sure).  You work out what you have paid in VAT on those purchases and add to your first return.

You can also deduct things like vat on rent for premises, account software and pretty much anything that you use for the business, that you have been charged VAT on.

This is standard VAT not a VAT scheme.  Though the schemes can be cheaper, depending exactly on your circumstances.

But all those costs that you have mentioned can be severely reduced by simply using something like Excel and Link my books.  Everything gets picked up from Ebay, Amazon and so on and automatically brought into your accounts package.

Submitting VAT via MTD is simplicity itself.  Just check it, then submit it!  Sorted.  🙂

A good accountant should always save you money than they cost at the end of the day.  So any that are actually costing you more are generally not good.

And just on the point of paying your VAT.  The easiest thing to do, particularly if you have it setup as above, is simply to move the VAT portion of your sale into a separate account and obviously not touch it until required.  I know every week exactly how much I owe and will have to pay.

[dch2112011]

From HMRC 

VAT reclaim 

Purchases before registration
You can reclaim VAT paid on goods or services bought before you registered for VAT if you bought them within:

4 years for goods you still have or goods that were used to make other goods you still have
6 months for services
You can only reclaim VAT on purchases for the business now registered for VAT. They must relate to your ‘business purpose’. This means they must relate to VAT taxable goods or services that you supply.

[therenewalworkshopltd]

I knew it was 6 months for something, but it's a fair while since I registered now.  🙂

But all those costs that you have mentioned can be severely reduced by simply using something like Excel and Link my books. 

I actually meant Xero or any other accounts package and not Excel.  

Though Excel can of course be used for accounts.

[dch2112011]

Yes I get that but thought I would post the link before you were barraged with responses declaring you were wrong - when in fact you were right to point it out from memory to  let the poster check for themselves.

[dch2112011]

You are only awarded an exception when your turnover exceeds the threshold temporarily (hence it is exceptional)  This should not be confused with exemption which is entirely different.

So HMRC will look at your turnover and where it has exceeded the threshold and you have put a case forward that it will not exceed the threshold in the following 12 months and it does you will be compulsorarily registered along with any penalties.

If your turnover remains below the threshold or is predicted to remain below the threshold you need do nothing.

However where you are predicted to exceed the threshold you are required to register for VAT and it is this prediction that ebay seem to apply correctly 

ie turnover month 11 £83000 predicted sales  12 month could be  £90545 using averaging or higher if using  month percentage comparison or even month increase expectation - eg December increases

[papso22]

I think you might be confusing the forward and backward criteria for VAT registration.

The backward is the rolling 12 months,  the forward is that you expect to exceed the threshold in the next 30 days, alone.  So one big sale of £90,000 for example.

I think you are right in that ebay predicts the 12 month figure, hence the 'prompts'.

[dch2112011]

No not confused - the exception is where a traders turnover exceeds the threshold during a 12 month period making them liable to register but the circumstance was exceptional so the trader can apply for an exception where HMRC will asses the circumstance and can allow the trader not to register because the trader has put a case forward that the following year the trading turnover will settle back to normal levels and not exceed the threshold.

If the threshold is then exceeded HMRC can force registration and apply penalties if the trader has not notified HMRC and registered

[papso22]

There is no VAT registration requirement for 'predicted' sales other than under the 'forward look' and that is only concerned with trading in the next 30 days.

That is not the same as 'liable no longer liable', which is for a temporary exceeding of the threshold.

[therenewalworkshopltd · Accepted solution]

I think that what is being referred to here is not so much a HMRC rule, but something that Ebay themselves are applying (predicting) to stop them becoming liable to pay the VAT.

Which is why we are seeing many accounts complaining that Ebay is forcing them to register before actually hitting the threshold.