E-commerce
Accountant for Amazon, Shopify and eBay Sellers
Platform payouts are net of fees, refunds and advertising, so the money that lands in your bank is not your turnover. Getting that distinction wrong is how sellers miss the VAT threshold.
An Amazon settlement is a single net figure covering sales, commission, fulfilment, storage, advertising, refunds and reserves. Book it as income and your turnover is understated, your costs are invisible, and your VAT registration date is wrong. We unpack the settlements properly so the accounts reflect what the business actually did.
We work with sellers on Amazon, Shopify, eBay and Etsy, and with the ones selling across several at once — including sellers based in and around North London who ship nationally and into the EU.
Settlements reconciled
Gross sales, fees, refunds and advertising separated out, not netted off.
VAT threshold watched
Registration is based on gross sales, not what the platform pays you.
Stock and cost of sales
Inventory valued properly, so your margin is a real number.
Cross-border VAT
OSS, IOSS and the marketplace deemed-supplier rules.
The VAT trap
You must register for VAT once your taxable turnover passes the threshold on any rolling twelve-month basis. Turnover means gross sales — the price the customer paid — not the payout after the platform has taken its cut. Sellers who track the bank balance instead of the sales report routinely discover they crossed the line months earlier, and by then the VAT is due on sales where no VAT was collected.
We monitor the rolling figure so registration happens on time, and we look at whether a flat-rate scheme or standard accounting suits your margins better before you commit.
Selling abroad
For sales to EU consumers, the One Stop Shop lets you report the VAT of every member state through a single return rather than registering in each one. Below the consignment threshold, Import One Stop Shop handles goods sent from outside the EU. Where you hold stock matters too: storing inventory in an overseas fulfilment centre generally creates a registration obligation in that country regardless of the schemes.
- OSS and IOSS registration and returns
- Marketplace deemed-supplier rules — when the platform owes the VAT, not you
- Import VAT and postponed accounting
- Overseas stock holdings and where they create a registration
Knowing your real margin
Most sellers can tell you their revenue and very few can tell you their contribution per unit after fees, returns, advertising and shipping. That number decides which products are worth restocking. We set the bookkeeping up so it falls out of the accounts every month instead of needing a spreadsheet exercise once a year.
When the marketplace is the one charging VAT
For a lot of sales, Amazon and eBay are treated as the supplier rather than you — the marketplace collects and pays the VAT, and your settlement shows the sale net of a tax you never handled.
That is fine until it reaches your VAT return, where those sales are accounted for differently from the ones you made directly. Treat a settlement as one lump of income and the return is wrong in both directions: output tax overstated on sales the platform already paid, and understated on the ones it did not.
The settlement report has the detail. It has to be unpacked rather than posted as a single figure, and doing that monthly is a fraction of the work of doing it once a year.
HMRC already has your sales figures
Digital platforms now report seller data to HMRC directly — identity, account details and the value of sales made through them. It is sent automatically and it arrives whether or not anything has been declared.
For a properly declared business this changes nothing. For anyone who has treated online selling as informal, it is the reason the letters have started arriving. If there is a gap, closing it voluntarily costs a great deal less than being asked about it — the penalty for an unprompted disclosure is far lower than for a prompted one.
Profitable and out of cash at the same time
This is the characteristic failure of a growing online seller, and it surprises people because both halves are true simultaneously. The business is genuinely making money and genuinely cannot pay for anything.
Stock is not an expense when you buy it
Buying stock takes cash out immediately, but for profit purposes the cost is recognised when the item sells, not when it arrives. So a seller who doubles their stock holding to keep up with demand has spent the money and has not reduced their taxable profit by a penny of it. The profit is real, the tax on it is real, and the cash is sitting in a warehouse.
Which is why the tax bill can feel impossible
The faster you grow, the worse this gets, because every additional pound of profit is being reinvested in inventory before the tax on it falls due. There is nothing wrong with the accounts — the answer is to forecast the tax alongside the stock purchasing rather than discovering the conflict when both are due. That is a planning problem, and it is solvable, but only in advance.
Returns and refunds belong in the numbers
A high return rate distorts everything if refunds are treated as a cost rather than as a reversal of the sale. Turnover is overstated, margin looks better than it is, and the VAT position can be wrong in your own favour — which is the direction that gets noticed. Record the refund against the original sale, including the VAT, and the picture stays honest.
Know your margin per channel, not overall
Different marketplaces charge different fees, and shipping costs vary by product and destination. An overall margin can be perfectly healthy while one channel or one product line loses money on every order. Sellers routinely discover this only when they stop and look, and it is usually the single most valuable half hour available to them.
Frequently asked
Do I need to register for VAT if I only sell on Amazon?+
Yes, if your gross sales pass the threshold — the platform collecting the money does not change your obligation. There are specific rules where Amazon is treated as the deemed supplier, mostly involving overseas sellers or imported goods, and those shift the VAT to Amazon rather than removing it.
Which accounting software works best for online selling?+
Xero or QuickBooks with a settlement-level connector, rather than a raw bank feed. The connector is what splits the payout into sales, fees and refunds; without it you are reconciling a single net number and losing the detail that makes the accounts useful.
How do I value stock I have not sold yet?+
At the lower of cost and net realisable value. Cost includes what you paid plus getting it to a saleable condition — inbound shipping and duty, not your ongoing storage fees. Unsold stock is an asset, not an expense, which is why a business can look profitable and still have no cash.
I sell as a hobby. When does it become a business?+
HMRC looks at whether you are trading — buying to resell, repeating transactions, seeking a profit. There is a £1,000 trading allowance, and above that you need to report. Selling your own unwanted possessions is generally not trading, however many of them there are.
Amazon collects the VAT — do I still put it on my return?+
Yes, but not as your own output tax. Where the marketplace is treated as the supplier it accounts for the VAT and your sale is reported differently from a direct one. The settlement report has to be broken down rather than posted as a single figure, or the return is wrong on both sides.
Does HMRC know what I sell online?+
Yes. Platforms report seller identity and sales values to HMRC automatically. If everything has been declared this is irrelevant; if there is a gap, disclosing it before being asked carries a much lower penalty than waiting for the letter.
My accounts say I made a profit but I have no money. How?+
Almost always stock. Cash leaves when you buy inventory; the cost only reduces profit when the item sells. A growing seller reinvests each month’s profit into more stock, so the profit is genuine, the tax on it is genuine, and the cash is in the warehouse. It is not an accounting error and it does not resolve itself — it needs the tax forecasting alongside the buying, so both are funded.
How should I record refunds?+
As a reversal of the original sale, not as an expense. Treating them as a cost overstates your turnover and your margin, and it can leave the VAT overstated in your own favour, which is the direction HMRC notices. Where a marketplace deducts refunds from your settlement, that netting has to be unpicked so the sale and the reversal both appear.
Do I need to track profit for each marketplace separately?+
Yes, and most sellers who do it find something they did not expect. Fee structures differ by platform, shipping differs by product and destination, and a healthy overall margin can conceal a channel or a product line that loses money on every order. Once the data is recorded per channel the analysis is straightforward; the work is in recording it that way from the start.
Local to you
Chartered accountants, just up the road.
We are based in Finchley and work across North London. Come in, call, or do the whole thing by email — whichever suits you.
Or call 07480 281548