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VAT on Amazon, eBay and platform fees: reverse charge, the sub-threshold trap, and what goes on your return.

Marketplace commissions, advertising spend and software subscriptions billed by overseas suppliers are <a href="https://www.gov.uk/guidance/vat-place-of-supply-of-services-notice-741a">reverse-charge services</a>: the UK business receiving them self-accounts for UK VAT. VAT-registered sellers declare the VAT and recover it on the same return, netting to nil on the fees. Sellers not yet registered for VAT face a harder problem: the value of those reverse-charge services counts toward the £90,000 registration threshold. A seller buying significant overseas platform and advertising services can cross the threshold without ever receiving the threshold equivalent in gross sales.

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Reverse charge
Overseas-billed marketplace fees, advertising and software are reverse-charge services. The UK seller self-accounts for UK VAT under <a href="https://www.gov.uk/guidance/vat-place-of-supply-of-services-notice-741a">Notice 741A</a>.
Counts toward £90k
The value of reverse-charge services counts toward the £90,000 VAT registration threshold. A sub-threshold seller with large overseas fee and ad spend may be required to register. <a href="https://www.gov.uk/guidance/vat-place-of-supply-of-services-notice-741a">Source: Notice 741A</a>.
Net nil
For VAT-registered sellers on the standard method, the reverse charge on platform fees nets to nil on the return: the same amount is both output tax (box 1) and input tax (box 4). Flat-rate scheme sellers cannot separately recover it.

Key considerations.

The short answer: overseas platform fees are reverse-charge services you self-account for

<p>When a UK business buys marketplace, advertising or software services from a supplier established abroad, <a href="https://www.gov.uk/guidance/vat-place-of-supply-of-services-notice-741a">Notice 741A</a> places the supply in the UK and makes the UK customer responsible for accounting for the VAT. The overseas supplier does not charge UK VAT on the invoice; the UK buyer self-accounts for it on their own VAT return.</p><p>For VAT-registered sellers on the standard method, the reverse charge creates matching entries in both box 1 (output tax) and box 4 (input tax), netting to nil where the fee is fully attributable to taxable supplies. The VAT is not a cost but it must appear on the return correctly.</p>

The sub-threshold trap: reverse-charge value counts toward your £90,000 threshold

<p><a href="https://www.gov.uk/guidance/vat-place-of-supply-of-services-notice-741a">HMRC confirms</a> that the value of reverse-charge services is included when calculating whether a business has exceeded the £90,000 VAT registration threshold. This is the standing trap for a growing seller: their gross sales (note: <strong>gross marketplace sales, not the net payout</strong>) are below the threshold, but their overseas platform fees, advertising spend and software subscriptions push the combined taxable supply value over £90,000.</p><p>Sellers in this position must register, account for VAT on their sales and include the reverse-charge values on their return. The registration point is the moment the combined total crossed the threshold, not the moment the seller noticed. <a href="/blog/vat-and-cross-border-selling/vat-threshold-gross-vs-payout">How gross sales, not payouts, count toward the threshold</a>.</p>

UK-billed platform fees: when UK VAT appears on your fee invoices instead

<p>The entity a marketplace bills its UK sellers from can and does change, and the VAT treatment follows the billing entity, not the platform's brand. Where a platform bills fees from a UK-established entity, the invoice shows UK VAT on commissions, advertising and other fee lines: for VAT-registered sellers that VAT is reclaimable as input tax on the return in the normal way (not a reverse-charge entry, because the supplier is UK-based). For sellers not registered for VAT, UK VAT on those fees is an irrecoverable cost. Where the fees are still billed from an overseas entity, the <a href="https://www.gov.uk/guidance/vat-place-of-supply-of-services-notice-741a">reverse charge under Notice 741A</a> applies instead. Check the seller-of-record and VAT number on your current fee invoices (in Amazon Seller Central, your tax document library) to confirm which treatment applies to you today.</p>

What the reverse charge looks like on your VAT return

<p>For services billed from an overseas entity (not the UK-billed fees example above), the return entries are: the net value of the fee in <strong>box 6</strong> (total value of sales and outputs, excluding VAT) and <strong>box 7</strong> (total value of purchases and inputs, excluding VAT); the VAT amount in <strong>box 1</strong> (VAT due on sales and other outputs, including the reverse charge); the same VAT amount in <strong>box 4</strong> (VAT reclaimed on purchases). The result is net nil VAT on those fees. An omission of either box 1 or box 4 understates both output and input VAT simultaneously. See also: <a href="/blog/vat-and-cross-border-selling/flat-rate-scheme-wrong-for-sellers">why the flat-rate scheme is usually wrong for goods sellers</a> (FRS forfeits this input VAT recovery).</p>

How we help.

VAT return review covering marketplace fees and advertising

We review your VAT returns to confirm that platform fees and advertising spend are treated correctly: reverse-charge entries on both sides of the return where applicable, and correct input VAT recovery on UK-billed fees. Service: <a href="/services/ecommerce-vat-compliance">ecommerce VAT compliance</a>.

Sub-threshold registration risk assessment

We review your overseas fee and ad spend against your gross sales to identify whether the combined reverse-charge value creates a registration obligation, and advise on the correct registration date if it does. Use <a href="/calculators/vat-threshold-tracker">the VAT threshold tracker</a> as a starting point.

FRS vs standard VAT modelling for sellers with significant fee spend

We model whether standard VAT accounting gives a better outcome than the flat-rate scheme given your specific mix of gross sales, stock costs and platform fee spend. For most stock-based ecommerce sellers, the FRS is the wrong choice once fee VAT is in the picture.

Common questions

Do I pay VAT on my Amazon seller fees?
It depends on how Amazon bills you. Following Amazon's move to UK-based billing, UK-VAT-registered sellers receive Amazon invoices showing UK VAT, which is reclaimable as input tax in the normal way. For other platforms that bill from overseas, the reverse-charge mechanism applies: you self-account for the VAT (both output and input), netting to nil on a standard-method return. Sellers not registered for VAT absorb the cost in both cases.
Are eBay and Etsy fees subject to the reverse charge?
Check your invoice. The reverse charge applies when the fee supplier is established abroad. The billing entity for a given platform's fees can change; always check the 'sold to' details and the VAT number on your fee invoice to determine whether UK VAT is already charged (recoverable as input tax) or whether you need to self-account under the reverse charge.
Can I reclaim the VAT I self-account for on platform fees?
Yes, if you are VAT-registered on the standard method and the fees relate to your taxable supplies. The reverse-charge input VAT goes in box 4 of your return and offsets the output VAT in box 1, netting to nil. Sellers on the flat-rate scheme cannot separately recover this VAT, which is one reason FRS is usually unsuitable for sellers with significant platform fee and advertising spend.
Do platform fees count toward the £90,000 VAT threshold?
Yes. <a href="https://www.gov.uk/guidance/vat-place-of-supply-of-services-notice-741a">Under Notice 741A</a>, the value of reverse-charge services (overseas platform fees, advertising, software subscriptions) counts toward the £90,000 registration threshold. A seller whose gross sales are below the threshold may still be required to register if their overseas fee and ad spend pushes the combined total above £90,000.
Is this the same as the construction reverse charge?
No. The construction domestic reverse charge is a completely different mechanism that applies to certain VAT-registered sub-contractors in the construction sector. The reverse charge on overseas platform fees applies because the place of supply of those services is the UK and the supplier is abroad (under Notice 741A). The two mechanisms have different scope, different triggers and different return treatments. They must never be confused.
I am under the threshold. Can overseas fees still force me to register?
Yes. If your gross sales are below £90,000 but the value of your overseas platform fees, advertising spend and software subscriptions (all reverse-charge services) pushes the combined taxable supply total above £90,000, you are required to register. Use <a href="/calculators/vat-threshold-tracker">the threshold tracker</a> and include your fee and ad spend values, not just your sales.

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