Frequently Asked Questions
What is ecommerce accounting?
E-commerce accounting is accounting for E-commerce businesses e.g. those that sell on online marketplaces like Amazon or eBay or sell on their own websites. There are two key differences between accounting for other businesses and E-commerce businesses. Firstly, a traditional business typically raises an invoice and receives payment from it’s customer. By contrast, an E-commerce business will receive payouts that could potentially relate to thousands of different orders, each from different customers. Secondly, a small traditional business will typically only be selling to customers within the UK. Whereas for an E-commerce business, it is much easier to start selling internationally and therefore have international VAT and GST obligations. Such obligations require the support of an E-commerce accountant.
What ecommerce accounting services do we offer?
We can support E-commerce businesses with all their accounting, taxation and bookkeeping needs. Typically we would expect an E-commerce business to need support with annual accounts preparation, corporation tax returns, VAT returns and confirmation statements as a minimum. We also find that because of the additional complexities of E-commerce bookkeeping, many E-commerce business owners prefer to get us to do the bookkeeping too. For those looking to scale their businesses, we offer management accounting and forecasting services. We also offer international VAT and GST services for when you are ready to take your business internationally. To see further details of the services we offer, please head to our E-commerce Accounting Packages page.
How will our ecommerce accounting service be beneficial to you?
Our E-commerce accounting services will ensure that you have timely and accurate financial information to inform the decision-making process for your E-commerce business. We will also ensure that you remain compliant with all taxes applicable to your business.
What ecommerce accounting software do we use?
We use Xero for all our E-commerce clients. There are two main reasons behind this. Firstly, we find that Xero has a simple user interface that is easy for business owners to understand. Secondly, Xero has a wide range of apps that it integrates with such as A2X, further enhancing the power of Xero.
When should I appoint an accountant?
The answer to this depends upon your business model. For example, if you are fulfilling from your garage and selling to customers in the UK with sales below £1,000 then you won’t even need to file a tax return. By contrast, a start up that is fulfilling from outside the UK to customers in the UK (a very common scenario for a dropshipper) would need to register for VAT before they can start selling and file VAT returns on a quarterly basis. In this case, you’re likely to want an accountant before you even make your first sale.
Which accounting services do I need?
This depends on your business model. As a minimum you will need an annual tax return (a self assessment tax return if you’re a sole trader or a corporation tax return if you’re set up as a limited company). To see which other services you may need, head to our packages page.
What accounting software should I use as an Amazon seller?
For an Amazon seller, we would recommend using Xero online accounting software. Xero is cloud based and integrates with most bank accounts to provide a direct feed of your bank transactions. We’d also then recommend integrating Xero with Amazon via our preferred E-commerce accounting app, A2X. A2X analyses payouts out between sales split by country and the various fees deducted by Amazon, ensuring that the VAT treatment applied to each is correct.
What are the annual accounting and taxation costs of a Company?
This will depend on the size and complexity of your business. We always provide a free initial consultation during which we will run through all of our services options to come up with a monthly package tailored to your needs. To get an idea on our pricing, please head to our packages page.
Do we just do Amazon Accounting?
No, we also work with sellers on a wide range of different platforms and marketplaces including eBay, Shopify, Etsy, WooCommerce, Bol.com, C-Discount, Hitmeister, Wayfair and many more.
Do you offer Shopify Accounting?
Yes, we can offer a full range of accountancy, taxation and bookkeeping services to support your Shopify business. Click here to read more about our Shopify accounting services.
Why is accounting and bookkeeping important for eCommerce businesses using Shopify?
By maintaining accurate and timely accounting and bookkeeping records, you can ensure you have a good oversight of the performance of your business. It can help drive decision making such as which products to focus on, when to take on additional employees or when to expand to selling to new regions.
How do you do accounting for Shopify businesses?
We recommend that bookkeeping records for a Shopify business are maintained within Xero cloud accounting software. This will integrate with your bank to pull through a live bank statement feed and will also integrate with Shopify. We would recommend integrating Shopify with Xero using our preferred E-commerce accounting app, A2X.
What cloud accounting software works best for Shopify businesses?
We recommend using Xero cloud accounting software for your Shopify business.
VAT Accountancy Services
What Does a VAT Accountant Do?
A VAT accountant ensures that you are complaint with VAT in all the countries in which you hold a VAT registration. This would typically include preparing a draft VAT return from the bookkeeping records of the business. They will then send you a draft VAT return for your review and approval, advising you of how much to pay, how and when. Once you’ve approved your VAT return, they’ll then ensure that the VAT return is submitted to the relevant tax authorities on time.
How does VAT work for ecommerce?
VAT for E-commerce can be complex. If you’re unsure of how your E-commerce business is impacted by VAT, we would recommend booking in with us for a free initial consultation. Once we’ve understood a little more about your business, particularly where you are fulfilling from, where you are fulfilling to, your average order value and your sales values and volumes by country, we’ll then be able to guide you through your VAT registration and filing requirements.
When is UK VAT registration mandatory?
For a business fulfilling to customers in the UK from within the UK, VAT registration will be mandatory when the UK VAT registration threshold is breached. The UK VAT registration threshold in the UK is currently £85,000 of sales per annum. However, if you expect your sales to exceed £85,000 in the next 30 days, then you’ll need to register sooner.
If you are fulfilling to customers in the UK and are fulfilling from outside the UK (e.g. dropshipping), then the VAT registration threshold will not apply to your business and you will need to register for UK VAT from when you first start trading.
Which VAT scheme should I be using?
For most E-commerce businesses, standard accruals basis VAT returns are appropriate. For a limited number of E-commerce businesses, particularly those with high margins but relatively low sales, it may make sense to register for the VAT Flat Rate Scheme. This is a VAT simplification scheme that means for an e-commerce business, they would simply pay UK VAT to HMRC at 7.5% of their gross sales. They wouldn’t however be able to reclaim VAT on costs incurred except for capital expenditure in excess of £2,000.
There is also the option to switch to a cash basis for filing your VAT returns. For most e-commerce businesses, this is unlikely to be of any benefit as sales are paid shortly after they are made. However, if for example you are letting your customers pay by installment then the cash scheme could be beneficial as you will only need to pay the VAT on your sales to HMRC once you receive payment from your customers.
Do you handle EU VAT?
Yes, we can provide EU VAT services to cover all your needs including VAT registration and VAT return filing in all 27 EU countries. We also offer IOSS/OSS registration and filing, which can be particularly useful if you are selling to multiple EU countries.
If I store goods in a European country, do I need to register for VAT?
If you are storing goods in an EU country, whether in your own warehouse or a 3PL, then you will need to register for VAT in the country you are holding goods. There is no registration threshold in this scenario.
I drop ship from China only so do I need to register for VAT?
This depends on where your customers will be. If they will be in the UK then you will need to register for UK VAT straight away. Equally, if your customers will be in the EU, you will need to register for EU VAT.
What is the VAT treatment for digital services?
The VAT treatment of digital services is a complex issue. We would recommend booking a free initial consultation with us to discuss this further.
What are the post-Brexit UK VAT changes?
There were various VAT changes that came into effect at the time of Brexit. Some of these were a direct result of Brexit whilst others where VAT changes planned to come into effect on the same day anyway. Please get in touch if you would like to find out more about how Brexit may have impacted VAT for your business.
Does VAT apply to delivery charges?
Firstly, with regards to reclaiming VAT on delivery charges incurred, the VAT treatment of delivery charges can vary depending on the specific delivery service received. Most delivery charges are subject to VAT with the exception of the more basic service options from Royal Mail which are exempt from VAT.
With regards to the VAT that you charge your customers on delivery charges, the VAT charged should align with the VAT that you have charged your customers on the products that they have purchased. For example, if you have sold your customer a children’s car seat which is zero-rated for VAT, you would also zero-rate your delivery charges, even if you have been charged VAT at 20% by your supplier.
What happens if my business fails to meet VAT requirements?
If your business fails to register for VAT when required to do so, fails to submit returns on time or is late in paying VAT to HMRC then the business is likely to incur penalties and fines.
Do you offer tax advice?
Yes, we can provide Corporation Tax Advice on all matters that are likely to impact your e-commerce business such as ways to minimize your corporation tax liability, remunerating the shareholders of a company in a tax-efficient way or complying with international VAT and GST.
Do you do international tax?
Yes, we cover VAT and GST registration and filing requirements in all the major markets including the EU, US, Canada, Australia and New Zealand.
Do you advise on Sales Tax and selling in the US?
Yes, we can provide a full review of your US GST obligations considering the physical and economic nexus requirements of all 50 US states. We can also provide ongoing support with US GST compliance.
How do your Amazon FBA clients deal with sales tax?
This depends on which countries our clients are using FBA in. For a UK business selling on Amazon UK only, the VAT implications are little different to selling on your own website. However, if you are selling in the EU or US, there are marketplace rules which affect how VAT/GST is accounted for and paid on your sales. Please get in touch if you would like to find out more.
Should you hire an e-commerce accountant?
Why would I choose Elver Ecommerce Accountants?
We a firm of charted accountants specialising in providing accountancy services to e-commerce businesses. We understand e-commerce so you won’t need to explain to us how to get your sales information from your Amazon Seller Central account or explain what dropshipping. We’ve got all that already and are ready and waiting to support your e-commerce business.
How do I sign up?
To sign up, we’d usually recommend booking in for a free initial consultation. This will give us both the opportunity to get to know one another a little better and make sure we’re the right fit for you. We’ll run through our service options and pricing to come up with a bespoke proposal tailored to your business. From there, you’ll be able to electronically accept our proposal and we’ll get you onboarded.
Are there any set-up fees?
Sometimes if you are just starting out you might need support with things like forming a limited company and registering for VAT or PAYE. We’ll charge a small one off fee for these services.
What is the contract term; monthly or annual?
The contract is a rolling monthly contract which you can cancel at any time with just 21 days notice.
How does it work if I have an existing accountant?
If you already have an existing accountant, as part of our onboarding process we’ll get their contract information from you and confirm that you’re happy for us to contact them. You’ll also need to get in touch with them to let them know you’ll be switching to us and give them permission to communicate with us. From there, we’ll get in touch with your existing accountants to get all the information that we need to ensure a smooth handover.
What does the process look like for each service?
As part of our free initial consultation we’ll talk through all of our different service options and the workflow involved for each.
What do I have to do and what do you do?
If you’ve signed up for our bookkeeping service, then all we would ask you to do is forward your receipts for expenditure to a dedicated email inbox and occasionally refresh the bank feed in Xero. We’ll take care of the rest.