The Internet means a business can sell products to practically anywhere in the world. There are many online selling platforms– Amazon and Etsy to name just two.
Set up an online shop, upload a photo and description of the products and hopefully the orders start rolling in.The platform collects the money from the customer sends the money to your bank account, after having deducted their listing fees, commission etc. However, this is not your “sale price” for VAT purposes. For example, sell a product for £100 and £80 hits your bank. The true sale price is £100 and there are commissions of £20. Pay VAT on just the £80 and you have underdeclared the VAT actually payable.
A further issue arises in that you may leave funds in the platform account for a while and only occasionally draw down from it. If you only record income as “sales” when it hits your bank account, you could be under-declaring income in a particular accounting period. It is usually necessary to download the financial reports from the selling platform and work from those when preparing your accounts.
Be aware that HMRC have access to all the sales information and “tie up” the figures in the accounts to the accounting information filed and will “investigate” if there are discrepancies. Another reason for a potential investigation might be that the details have been correctly recorded in the accounts, but the business has changed from a sole trader to a limited company with a different VAT number, but this information has not been updated in the underlying selling platforms, so HMRC think sales have not been disclosed!
Please contact us today if you think you might have any potential “issues” in these areas.
