Ecommerce Finance

Accounts and tax for UK Shopify store owners.

Running a Shopify store means receiving payments through Shopify Payments, PayPal, Stripe, Klarna and other gateways, each settling on a different schedule and netting fees differently. Bookkeeping that works from bank deposits rather than gross order values will misstate both revenue and <a href="https://www.gov.uk/vat-registration">VAT turnover</a>. On your own Shopify store you account for your own VAT; unlike sellers on third-party marketplaces, there is no deemed-supplier mechanism shifting that liability to the platform. We work with Shopify sellers on <a href="/services/settlement-payout-reconciliation">payout reconciliation</a>, <a href="/services/ecommerce-vat-compliance">VAT compliance</a> and accounts that reflect the actual trading position.

What makes shopify sellers finance different.

Your Shopify payout is not your revenue

Shopify Payments, PayPal, Klarna and Stripe each settle net of transaction fees on their own schedule. A single week's orders may arrive as three or four deposits at different times, each after a different fee deduction. Reconciling all gateway payouts back to gross order revenue, with returns and chargebacks matched to the correct period, is the foundation of accurate Shopify bookkeeping. Working from bank statements alone understates gross income and produces an incorrect VAT figure. See our <a href="/services/settlement-payout-reconciliation">settlement and payout reconciliation service</a>.

VAT on gateway and app fees from overseas

Stripe, PayPal, Shopify's US-billed app fees and Google/Meta advertising fees are services supplied from overseas. Under <a href="https://www.gov.uk/guidance/vat-place-of-supply-of-services-notice-741a">Notice 741A</a> you self-account for UK VAT on those fees through the reverse charge on your own VAT return, and that fee value counts toward your <a href="https://www.gov.uk/vat-registration">£90,000 registration threshold</a>. A Shopify seller buying significant volumes of overseas-billed services can hit registration obligations earlier than expected. See <a href="/vat/vat-on-marketplace-fees">/vat/vat-on-marketplace-fees</a> for the full gateway-fee VAT analysis.

You account for your own VAT on your Shopify store

On a Shopify own-store, you are always the seller responsible for UK VAT. This is the key distinction from selling on Amazon or eBay, where <a href="https://www.gov.uk/guidance/vat-and-overseas-goods-sold-to-customers-in-the-uk-using-online-marketplaces">the marketplace can be the deemed supplier</a> for non-UK-established sellers. On your own store there is no platform to shift VAT liability to; your <a href="https://www.gov.uk/vat-registration">£90,000 threshold</a> is on gross sales, and you submit your own VAT returns. See <a href="/vat/deemed-supplier-establishment">/vat/deemed-supplier-establishment</a> for the full contrast with marketplace-seller treatment.

Inventory, COGS and structure as the business scales

Shopify sellers buying stock for resale need accruals-basis accounts with a proper cost-of-goods-sold figure. Under <a href="https://www.gov.uk/hmrc-internal-manuals/business-income-manual/bim33115">BIM33115</a>, closing stock is valued at the lower of cost and net realisable value. Cash-basis accounting that expenses stock when purchased, regardless of when sold, produces a misleading profit figure. As revenue grows, many Shopify sellers consider incorporation; the decision affects income tax, National Insurance and owner extraction. For EU cross-border sales, see <a href="/services/selling-into-the-eu">Selling into the EU</a> and <a href="/vat/135-import-rule">/vat/135-import-rule</a> for low-value direct consignments. Generic incorporation mechanics at <a href="https://hollowaydavies.co.uk">hollowaydavies.co.uk</a>.

How we help shopify sellers.

Payout reconciliation and monthly bookkeeping

We reconcile Shopify Payments, PayPal, Stripe and other gateway settlements back to gross order values, account for returns and chargebacks in the correct period, and produce monthly accounts that reflect true trading revenue. This feeds your <a href="/services/ecommerce-vat-compliance">VAT return</a> and income tax position. Details at <a href="/services/settlement-payout-reconciliation">settlement and payout reconciliation</a>.

VAT compliance for UK and cross-border sales

We handle UK VAT returns for Shopify sellers, advise on the reverse-charge treatment for gateway and overseas app fees under <a href="https://www.gov.uk/guidance/vat-place-of-supply-of-services-notice-741a">Notice 741A</a>, and assess whether IOSS or OSS registration is appropriate for your EU customer volumes. For low-value direct consignments, see <a href="/vat/135-import-rule">/vat/135-import-rule</a> and <a href="/vat/ioss-vs-oss">/vat/ioss-vs-oss</a>.

Annual accounts and tax returns

We prepare sole-trader Self Assessment returns and limited company accounts for Shopify businesses, with stock and COGS properly recognised. Use our <a href="/calculators/sole-trader-vs-ltd-sellers">sole trader vs limited company calculator</a> and <a href="/calculators/seller-take-home">seller take-home calculator</a> to model extraction options. See also <a href="/blog/business-structure-and-tax/sole-trader-vs-ltd-online-sellers">sole trader vs limited company for online sellers</a>. Generic salary/dividend and MTD ITSA mechanics at <a href="https://hollowaydavies.co.uk">hollowaydavies.co.uk</a>.

Common questions

Does Shopify account for VAT on my sales, or do I?

On your own Shopify store, you account for your own VAT. Unlike non-UK-established sellers on third-party marketplaces (where the <a href="https://www.gov.uk/guidance/vat-and-overseas-goods-sold-to-customers-in-the-uk-using-online-marketplaces">marketplace can be the deemed supplier</a>), there is no platform to absorb your VAT liability on a DTC own-store. You must register once your taxable turnover (gross sales) exceeds <a href="https://www.gov.uk/vat-registration">£90,000</a> and submit your own returns. See <a href="/vat/deemed-supplier-establishment">/vat/deemed-supplier-establishment</a>.

How do I reconcile Shopify payouts for my accounts?

Shopify Payments and other gateways settle net of fees on their own schedule. For accurate accounts and VAT returns, match each payout back to the gross order values it covers, account for returns and refunds in the period processed, and record gateway fees separately as business expenses. See our <a href="/services/settlement-payout-reconciliation">settlement reconciliation service</a> and <a href="/blog/vat-and-cross-border-selling/vat-threshold-gross-vs-payout">VAT threshold: gross vs payout</a>.

Do I pay VAT on Shopify, PayPal and Stripe fees?

Where those fees are billed from an overseas entity, they are reverse-charge services under <a href="https://www.gov.uk/guidance/vat-place-of-supply-of-services-notice-741a">Notice 741A</a>: you self-account for UK VAT on your own return, and the fee value counts toward your £90,000 registration threshold. See <a href="/vat/vat-on-marketplace-fees">/vat/vat-on-marketplace-fees</a>.

Can HMRC see my Shopify sales?

Where Shopify Payments or other platforms fall under <a href="https://www.gov.uk/guidance/reporting-rules-for-digital-platforms">digital platform reporting rules</a> (in force from 1 January 2024, first reports due January 2025), HMRC may receive data about your seller income. Regardless of whether your specific gateway reports you, your obligation to register for Self Assessment and VAT (where applicable) exists independently of what platforms report. See <a href="/blog/platform-reporting-and-hmrc-letters/platform-reporting-rules">platform reporting explained</a>.