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bigduckontax, Accountant
Category: Tax
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Hi, Im starting up a business trading through Ebay. I buy

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I'm starting up a business trading through Ebay.
I buy goods from china that are rarely being stopped at customs for VAT / import tax.
As i deal through ebay, VAT is including in the price.
Do i have to pay VAT on the items i am buying from china, if yes how do i go about paying for this?
I'm right in presuming i would pay 20% of the total order from china ?
I could really do with some advice on what i do and do not have to pay through out these proceedings.
Thanks in advance

Hello James, I'm Keith and happy to help you with your question.

Firstly I assume that you have registered your business for VAT. This is actually not necessary if turnover in a year does not exceed or approach 81K. If you do not need to register it is merely a cash flow decision as to whether registration would be advantageous.

Secondly you don't pay VAT on goods you buy for your business, you merely pay the supplier's invoice, reclaiming the VAT if any has been levied. So for your Chinese imports some you say have import tax and VAT added by HMRC on clearing Customs. The import tax is merely part of your cost of sales, the VAT, if charged, is debited to your VAT account. When you sell items on eBay and bring the sales to account the book keeping entries are Debit Cash/Bank; Credit Sales and VAT, the Sales value for posting being the total received divided by 1.2. The balance is, of course, the Output Tax at 20%. Then, when you do your quarterly VAT return on line the relevant figures will fall out of the various ledger headings used each period and the net VAT due payable to HMRC. I do hope you can see that it is actually quite a simple process, provided you maintain adequate, detailed records.

I trust I have helped you solve your problem.

Customer: replied 3 years ago.

Hi Keith,

Thank you for your reply, Please may i clarify a few things.

Firstly i really appreciated your help, but i'm afraid i'm quite new to this and i would appreciate Lehman term like responses, towards the end of your message i got a little confused.

May i clarify, i plan to register, but if i don't register for a VAT business because it would more favorable to not.

I buy stock ( i intend to resell ) and i pay the invoice ( VAT isn't mentioned in the invoice )

My goods are not stopped at customs so i receive the goods having not paid VAT or import tax. Where do i go from here. Will i get in trouble for not paying or getting in touch with HMRC.

I'm trying to see whether i can be a non registered, Trading through Ebay / paypal. And not be charged VAT. Then as a self employed individual i just pay my taxes at the end of the year.

If i should be paying VAT on all stock bought from china i would rather get registered then i can reclaim back certain amounts... i think ?

I'm obviously trying to make the most money but through what is safe and legal.

I look forward to your response.


Whether registration would be favourable depends upon the exact cash flow in and out of your business. It's a wet towel round the head and a lot of the backs of envelopes to work it all out! However, you intend to register anyway.
Although, as you say, there is no VAT on the invoices, naturally they come from China, there could be circumstances where items you purchase to operate your business do bear UK VAT and the VAT can be reclaimed as input tax. Packaging is a classic example. However, where HMRC are charging VAT on imports then these are reclaimable input taxes.
You do not pay VAT on your Chinese imports unless HMRC levy it on clearance. If HMRC let goods through the customs clearance without charge then, in basic terms, it's bully for you! All my advice is perfectly legal.
Have I assisted you and cracked all your problems?
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Customer: replied 3 years ago.

In terms of registering i know its a headache and as i may not come close to the limit, i still may not register.

I do plan to give you 5 /5 from this thread.

Just to confirm - So my Chinese goods - i only pay VAT on them if they are stopped in customs. So if im not registered, i can forget about HMRC getting in touch and fining me for the VAT they could have charged on those deliveries.

If your answer is clear this will be my last message.

thank you keith

You are correct in your sermise, james. If HMRC do not levy it on import you don't pay any, simple as the Meerkat in the TV advert would say.
HMRC cannot raise penalties for non payment of taxes and duties for which they have failed to charge on customs clearance. They might, of course raise charges at a later date, but that is unlikely in the extreme. If they do then just pass it through your books of account as normal.
Hope that clears the yardarm for you.
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