Amazon and eBay Sellers: Accounting and VAT Guide

Marketplace selling adds two problems to ordinary retail accounting. The platform reports money to you net of a long list of deductions, and the VAT answer depends on where you are established and where the goods are. Both are manageable once you know what you are looking at.

The settlement report is the source document

Your bank shows a transfer every fortnight or so. That figure is sales less referral fees, less fulfilment and storage fees, less refunds, less advertising, plus or minus reserves and adjustments. Treating it as turnover understates your sales by the entire fee load, which on some categories is a quarter of the sale price.

What belongs in the books, separately, is each of these.

• Gross sales including the postage the buyer paid.
• Referral or final value fees charged as a percentage of the sale.
• Fulfilment fees for picking, packing and shipping, where the platform does it.
• Storage fees including long term storage on slow stock.
• Advertising billed by the platform.
• Refunds and any refund administration fee.
• Reserves held back, which are still your money.

Each is deductible as a business cost, which is the point of recording them. None of them should disappear inside the sales line.

Where the VAT answer comes from

Two facts decide it: whether the seller is established in the UK, and where the goods are when they are sold.

For most readers of this guide, a UK business selling its own stock held in the UK, the answer is the first line: you are the seller and you account for the VAT yourself once you are registered. The deemed supplier rules that people have heard about are aimed at overseas sellers.

Registration is on gross taxable turnover, over £90,000 in any rolling twelve months or expected within the next thirty days. It is measured on what the customer paid, not on what the platform transferred, which is why sellers who watch their bank balance register late.

Stock you cannot see

Stock in a fulfilment centre is still your stock and still belongs on your balance sheet at the year end. Platform inventory reports give you quantities; you supply the cost. Valued at cost, not at the price you hope to sell it for.

Three things in marketplace selling distort the cost if you let them. Long term storage fees on ageing stock are a running cost, not part of the stock value. Units destroyed, lost or disposed of have to come out of stock rather than sitting there as an asset, and platform reimbursements for lost units are income. And returned items that come back unsellable are a write off, which is worth tracking by product, because a line with a 30% return rate and a 20% margin is losing money while the sales report looks healthy.

Multichannel, one set of books

A seller on Amazon, eBay and their own Shopify store has one business, not three. One set of accounts, one VAT registration, one tax return. What changes by channel is the fee structure, the VAT treatment and the margin, which is exactly why the books should carry a channel analysis. Sales and gross margin by channel, fees as a percentage of sales by channel, and stock by location is the reporting that tells you where to put your next thousand pounds of stock.

Our retail and ecommerce page covers how we work with multichannel sellers, and the Shopify accounting guide goes deeper on the direct store side.

Platform reporting to HMRC

Since January 2024 digital platforms have had to collect seller details and report income to HMRC each year, and give you a copy of what they reported. Details are not reported for sellers making fewer than thirty sales of goods in a calendar year and receiving less than about £1,700 for them.

This does not create a new tax and it does not replace your records. Two things to note. The platform reports on a calendar year and your tax year runs to 5 April, so the figures will not match and are not meant to. And the copy you receive is net of fees and commission, so it is not your turnover either. Keep it, reconcile to it, and do not file from it.

Sole trader or limited company

At lower profits, trading as a sole trader is usually simpler and often no more expensive. A company becomes worth looking at as profits rise, where you are reinvesting rather than drawing everything, or where a supplier or a platform requires one. Dividend rates rose by two percentage points in April 2026, to 10.75% at the ordinary rate and 35.75% at the upper rate, which narrowed the gap. It is a calculation on your own numbers, not a rule.