Can this VAT be reclaimed?

[JCKST1]

Are any accountants able to clear this up, I did message my accountant but hes away so got a half arsed reply from his assistant.

We sell products on eBay, when sold eBay pay us but deduct their fees which are VAT included, so we get the net amount.
E.g:
Sold for £1000
£800 enters our bank account after their cut.

We pay 20% VAT on the sale price of £800. This is all reported and filed on Xero.

That leaves £200 unaccounted for, as we sell a lot on eBay (about £10-15k per month) this adds up.

The £200 commission has VAT included in it. Can this be reclaimed separately? They are saying it cant as VAT has been paid on the sale but I am looking at it as more of an expense/service cost? In order for us to sell it for £800 we had to pay eBay £200incl VAT.

What do you all think?

[22s]

Separate expense, so should be VAT reclaimable (in my opinion, not an accountant).

[Doofus]

You sell for £1,000, including VAT. £166.67 VAT payable to HMRC.

Ebay charges you £200, including VAT. £166.67 fees charged to P&L, £33.33 VAT reclaimable from HMRC. You need a VAT invoice from Ebay.

Net effect:

Revenue £833.33
Cost £166.67

Payable to HMRC £133.34

This is the same end result as what you said, but your accounting is wrong.

I am (was) an accountant.

[JCKST1]

Thanks guys, thats what I thought.

Here is our latest invoice:
https://ibb.co/FbTjsdpX

This has been going on years and we have similar bills for each month going back.

The commission never touches our bank so has never been picked up on or filed, just the net sale price.

So based on the above we could file that and claim back the £377 in VAT on the fees?

[Doofus]

JCKST1 said:

Thanks guys, thats what I thought.

Here is our latest invoice:
https://ibb.co/FbTjsdpX

This has been going on years and we have similar bills for each month going back.

The commission never touches our bank so has never been picked up on or filed, just the net sale price.

So based on the above we could file that and claim back the £377 in VAT on the fees?

Yes, but you have to pay a correspondingly higher output VAT on your gross sale price. You can'y pay VAT on the net of revenue minus fees and then claim back the VAT on the fees again.

[JCKST1]

Doofus said:

Yes, but you have to pay a correspondingly higher output VAT on your gross sale price. You can'y pay VAT on the net of revenue minus fees and then claim back the VAT on the fees again.

Ah right okay, we the only way of doing that would be to manually add each order to Xero at the gross price rather than it automatically reconciling the net.
I presume if we do this it would be beneficial for the business than the way it is set up now?

[Doofus]

JCKST1 said:

Doofus said:

Yes, but you have to pay a correspondingly higher output VAT on your gross sale price. You can'y pay VAT on the net of revenue minus fees and then claim back the VAT on the fees again.

Ah right okay, we the only way of doing that would be to manually add each order to Xero at the gross price rather than it automatically reconciling the net.
I presume if we do this it would be beneficial for the business than the way it is set up now?

No. It will make no difference to the business. What you're doing now is just wrong. You are both underpaying output VAT and under claiming input VAT.

The net effect is zero, but HMRC will still have you for it if they do an inspection.

ETA: Plus, you're misstating your revenue and your cost of sales, so you don't have a true view of your business. If you moved from Ebay to another platform, you'd be unable to compare the performace of each.