If you sell on eBay and you're UK VAT-registered, your monthly fee invoice almost certainly shows no VAT on it. That's not an error, and it doesn't mean the fees are VAT-free. It means you have to account for the VAT yourself, under what HMRC calls the reverse charge.
Get the boxes wrong and you'll either overstate your turnover, understate your VAT, or trip up Making Tax Digital software that wasn't built for service reverse charges. Get them right and the whole thing nets to zero in most cases.
This guide shows you exactly which VAT-return boxes the eBay reverse charge belongs in, with a worked 2025/26 example and the journal behind it. It's written for UK VAT-registered eBay sellers; if you're not registered yet, skip to the FAQ on the registration threshold, because eBay fees can quietly push you over it.
Why are there no VAT on my eBay fees? {#why-no-vat}
Because eBay bills your selling fees from its Luxembourg company, eBay S.a.r.l. (registered in Luxembourg, RCS B164557), which is a supplier outside the UK. Once you've added a valid UK VAT number to your eBay account, eBay treats you as a business customer and invoices the fees with no VAT, leaving you to account for it.
Selling fees, final value fees, insertion fees, Promoted Listings and store subscriptions are all supplies of services to your business. Under the general business-to-business rule, the place of supply for these services is where the customer belongs, so the supply happens in the UK, not Luxembourg (VAT Notice 741A, section 6.3).
That means UK VAT is due. eBay just doesn't charge it. You do, through the reverse charge.
What is the reverse charge on eBay fees? {#what-is-reverse-charge}
The reverse charge is a mechanism where you, the customer, account for the VAT instead of the supplier. You charge yourself the VAT as output tax and, in the same return, reclaim it as input tax under the normal rules.
HMRC sets out four conditions for the reverse charge to apply, and eBay fees meet all four: the place of supply is the UK, the supplier belongs outside the UK, you belong in the UK, and the supply is not exempt (VAT Notice 741A, section 5.1).
In HMRC's words, you "credit your VAT account with an amount of output tax" and "at the same time debit your VAT account with the input tax to which you're entitled, in accordance with the normal rules" (VAT Notice 741A, section 5.2). For a fully taxable eBay business that can recover all its input tax, the two amounts cancel out and there's no net VAT cost.
The reverse charge is calculated at the UK rate that would apply if the service were supplied here. eBay fees are standard-rated, so that's 20% for 2025/26 (gov.uk VAT rates).
Which VAT-return boxes does the reverse charge go in? {#which-boxes}
This is where most sellers slip. The reverse charge on a service touches four boxes, not two. You're treating the fees as both a sale to yourself and a purchase, so the net value appears twice.
HMRC's filing guidance is explicit: as the customer in a reverse charge, you "fill in box 1 (output VAT), box 4 (input VAT), box 6 (value of the deemed supply) and box 7 (purchase value)" (VAT Notice 700/12, paragraph 4.6).
Here's what each box holds for your eBay fees.
| VAT-return box | What it's labelled | What you put in it for eBay fees |
|---|---|---|
| Box 1 | VAT due on sales and other outputs | The 20% reverse charge VAT on the net fees |
| Box 2 | VAT due on acquisitions (NI only) | Nothing. This is for goods, not services |
| Box 3 | Total VAT due | Box 1 + Box 2 (flows through automatically) |
| Box 4 | VAT reclaimed on purchases | The same 20% VAT as Box 1 (if fully recoverable) |
| Box 6 | Total value of sales (net) | The net eBay fees |
| Box 7 | Total value of purchases (net) | The net eBay fees |
Two things sellers get wrong:
First, Box 2 is not used. Box 2 is only for acquisitions of goods into Northern Ireland, never for services. eBay fees are a service.
Second, the net fee value goes in both Box 6 and Box 7. It feels odd to add a cost into your sales figure, but that's how a service reverse charge works, because you're treated as having made the supply to yourself.
Worked example: a quarter of eBay fees {#worked-example}
Illustrative example. Priya runs a homeware shop on eBay and is UK VAT-registered with her VAT number on her eBay account. Over her VAT quarter, eBay's invoices (from eBay S.a.r.l., Luxembourg) show net seller fees of £1,250.00 with no VAT charged.
She applies the reverse charge at the standard rate of 20% for 2025/26:
- Reverse charge VAT = £1,250.00 x 20% = £250.00
Her VAT return entries for these fees are:
| Box | Entry | Amount |
|---|---|---|
| Box 1 (output VAT) | Reverse charge VAT she charges herself | £250.00 |
| Box 4 (input VAT) | The same VAT, reclaimed as input tax | £250.00 |
| Box 6 (net sales) | Net value of the deemed supply | £1,250.00 |
| Box 7 (net purchases) | Net value of the fees purchased | £1,250.00 |
Net VAT effect: £250.00 in Box 1 minus £250.00 in Box 4 = £0.00. Priya pays no extra VAT, but the values are reported correctly and her return reconciles.
The bookkeeping journal behind it, if your software needs it entered by hand, looks like this:
| Account | Debit | Credit |
|---|---|---|
| Selling fees (expense, net) | £1,250.00 | |
| VAT input tax (Box 4) | £250.00 | |
| Accounts payable / eBay | £1,250.00 | |
| VAT output tax (Box 1) | £250.00 |
The £1,250.00 is the real cost to her business. The £250.00 in and £250.00 out wash through the VAT control account and leave nothing behind.
What if eBay did charge me 20% VAT? {#ebay-charged-vat}
If you haven't given eBay a valid VAT number, or your account is set up as a private (non-business) seller, eBay may add 20% VAT to your fees rather than applying the reverse charge.
In that case there's no reverse charge to make. You simply treat it like any other UK purchase with VAT on it: put the VAT in Box 4 to reclaim it, and the net fees in Box 7. Box 1 and Box 6 are not touched for these fees.
The practical fix is usually to add your VAT number to your eBay account so the fees are invoiced correctly going forward, then handle each period on whatever basis the invoice actually shows. Always work from the invoice in front of you, not from what you expect it to say. If an invoice shows VAT, reclaim it; if it shows none, reverse charge it.
This matters for our ecommerce clients more than almost any other VAT point, because the two methods look similar on paper but post very differently. If you'd like a second pair of eyes on your eBay fee VAT, that's exactly the sort of thing we handle for eBay sellers.
Does the reverse charge affect my registration threshold? {#registration-threshold}
Yes, and this is the trap for sellers who aren't registered yet.
The value of reverse charge services you receive counts towards the VAT registration threshold. HMRC says "the value of those supplies must be added to the value of your own taxable supplies when determining whether you should be registered for UK VAT" (VAT Notice 741A, section 5.7).
For most eBay sellers this is academic, because your sales hit the £90,000 threshold (the registration threshold from 1 April 2024) long before your fees do (gov.uk VAT registration thresholds). But it's a genuine rule, and it's worth knowing that your eBay fees are part of the calculation, not separate from it.
Once you cross £90,000 of taxable turnover in any rolling 12-month period, you must register, and from then on the reverse charge on your fees applies in full.
How does this fit MTD and your bookkeeping? {#mtd-bookkeeping}
All VAT-registered businesses must keep digital records and file through Making Tax Digital compatible software (HMRC Making Tax Digital for VAT). The catch with eBay fees is that some software handles the goods reverse charge cleanly but not the services version, so the entries can land in the wrong boxes.
If your bookkeeping tool tags eBay as an EU supplier and pushes the figures into Box 2, Box 8 or Box 9, that's the goods treatment and it's wrong for fees. Services belong in Boxes 1, 4, 6 and 7, as set out above. In some packages you'll need a manual adjustment or a service-specific reverse charge tax code to get it right.
A clean approach is to reconcile eBay's monthly fee invoices to your bookkeeping every period, apply the reverse charge as a single posting, and check that Box 1 and Box 4 move together. Accurate, MTD-ready records here also keep your profit figures honest, because the £1,250 of fees in the example is a real deductible cost against your trading profit. If you want this set up properly from the start, our bookkeeping service does exactly this for ecommerce sellers.
Frequently asked questions {#faqs}
Why does eBay not charge VAT on my seller fees?
Because eBay bills UK business sellers from its Luxembourg company, eBay S.a.r.l., which is a supplier outside the UK. Once your valid UK VAT number is on your eBay account, eBay invoices the fees without VAT and you account for the UK VAT yourself under the reverse charge.
Which VAT-return boxes do eBay fees go in?
For the reverse charge, the VAT goes in Box 1 (output VAT) and the same amount in Box 4 (input VAT), and the net fee value goes in both Box 6 and Box 7. Box 2 and Box 3 are not used for services. This follows VAT Notice 700/12, paragraph 4.6.
Do I actually pay any VAT on the reverse charge?
If you can recover all your input tax, no. The Box 1 output VAT and the Box 4 input VAT are equal and cancel out, so there's no net VAT to pay. You're still required to report all four boxes correctly.
What rate do I use for the reverse charge on eBay fees?
The UK standard rate, which is 20% for 2025/26, because eBay's selling fees are standard-rated services. You apply 20% to the net fee figure on eBay's invoice.
What happens if my eBay invoice shows 20% VAT instead of none?
Then there's no reverse charge to apply. You reclaim that VAT in Box 4 and put the net fees in Box 7, exactly like a normal UK purchase. Adding your VAT number to your eBay account usually switches future invoices to the reverse charge.
Do eBay fees count towards the VAT registration threshold?
Yes. The value of reverse charge services you receive is added to your own taxable turnover when checking whether you must register, per VAT Notice 741A, section 5.7. In practice your sales usually reach the £90,000 threshold first.
Get your eBay VAT right
The reverse charge on eBay fees is simple once you know the four boxes, but it's one of the most commonly miscoded items in ecommerce bookkeeping. If you'd rather have it handled correctly every quarter, book a call with a Zmartly accountant and we'll set up your eBay VAT and bookkeeping so the boxes are always right. Start at our page for eBay sellers.
