Following changes to eBay’s corporate structure, thousands of traders on the platform are now required to pay 20 per cent Value Added Tax (VAT) on all fees incurred.
Changes were made effective on 1 August and now businesses must pay fees to the domestic business, rather than the previous eBay Europe S.à r.l, based in Luxembourg.
The online marketplace decided to implement the changes following its split from Paypal in 2015 and the 2016 government introduction of the package of measures, which has been designed to combat rapidly growing VAT evasion by overseas traders that sell goods in the UK via online shopping platforms such as eBay and Amazon.
The new regulations are likely to affect small business traders and those unable to reclaim VAT the most as businesses already VAT registered will see no additional cost, as they will be able to claim tax credits.
Businesses based in an EU country, other than the UK or Luxembourg, and who have a VAT number, will also benefit from not being charged VAT on their fees.
A spokesperson for eBay said: “We’d recommend all business sellers to consult their tax advisers to find out how VAT applies to their eBay businesses.
“We currently already charge 20 per cent UK VAT on seller fees for non-business sellers. This won’t change, and non-business sellers won’t see any changes in their fees.”
It is thought that these changes will secure an additional £875 million of VAT revenue for HM Revenue and Customs (HMRC) by 2021.