Most e-commerce costs never appear as a supplier bill. Marketplaces and payment providers take their fees out of the money they pass on, and the seller sees a net payout. For VAT, each fee is a purchase of a service, and the seller must decide how to treat it from the fee invoice or statement the platform issues.
Three possible treatments
| Fee invoice shows | Treatment for a VAT-registered UK seller |
|---|---|
| UK VAT charged by a UK entity, with a UK VAT number | reclaim the VAT as input tax with the invoice |
| No VAT, supplier outside the UK, service is taxable | reverse charge: account for output VAT in box 1 and input VAT in box 4, value in boxes 6 and 7 |
| No VAT because the service is exempt (some payment processing) | no VAT to reclaim or account for; record the fee net |
Which applies depends on the contracting entity named on the invoice, which can change over time and may differ between a seller’s accounts in different countries. Check it at least once a year for each platform rather than copying last year’s coding.
Marketplace and subscription fees
Selling fees, referral fees, advertising, fulfilment and monthly subscription fees are standard-rated services. If the marketplace invoices through a UK company, the seller reclaims the UK VAT shown. If it invoices from an overseas entity without VAT, the seller applies the reverse charge. Either way, the fees should be posted gross (not netted against sales) so turnover in box 6 is not understated.
Payment processor fees
Card processing and wallet fees (from providers such as Stripe, PayPal, Square or SumUp) are often treated as exempt financial services, but not always: some providers or some of their products are invoiced with VAT, and some are supplied from outside the UK. Use each provider’s monthly fee statement or VAT invoice:
- statement shows UK VAT: reclaim it;
- statement says the fees are exempt: no VAT, no reverse charge;
- overseas supplier, fees not exempt: reverse charge.
Do not assume one provider’s treatment applies to another, and do not apply the reverse charge to fees that are exempt; that inflates boxes 6 and 7 and can affect partial exemption.
Posting a payout
A seller’s marketplace settlement shows sales of £1,200 (including £200 VAT), selling fees of £180 with £30 UK VAT invoiced by the marketplace’s UK entity, and a payout of £990.
| Account | Debit | Credit |
|---|---|---|
| Marketplace clearing | £1,200 | |
| Sales | £1,000 | |
| Output VAT | £200 | |
| Marketplace fees | £150 | |
| Input VAT | £30 | |
| Marketplace clearing | £180 | |
| Bank | £990 | |
| Marketplace clearing | £990 |
The clearing account returns to nil, and both the sale and the fee are visible gross.
Evidence
Download the platform’s VAT invoices or fee statements every month and keep them with the settlement reports. A payout figure on a bank statement is not evidence for an input VAT claim.
For how marketplaces account for VAT on certain sales themselves, see VAT on dropshipping and marketplaces; for the reverse charge rules, reverse charge VAT; for the clearing account, card payment clearing in the chart of accounts.