Sports Direct In VAT Dispute With EU Tax Authorities
Following on from our last article that looked at tax investigations, it seemed a good idea to take a look at one of the biggest tax investigations of the year. The investigation in question is the dispute currently taking place between Mike Ashley’s Sports Direct and the EU tax authorities of France, Ireland and Finland. Let’s take a look at what Sports Direct are being accused of, and what the likely outcome of the investigation is.
What Have Sports Direct Done?
Sports Direct set up a separate company called ‘Barlin Delivery’ under the name of Mike Ashley’s brother, John Ashley. It was claimed that this company was set up to deliver orders of Sports Direct abroad, despite the fact that the company actually has no drivers or trucks.
Reportedly, several EU countries are dismayed at the fact that Mike Ashley’s company only paid VAT to the UK over a seven-year period on sales it made to the EU. Mike Ashley’s company have claimed that the purchases made over this period were not a direct transaction between the customer and Sports Direct itself, but rather the customer was paying Barlin Delivery to collect the parcel.
How Has This Allowed Them To Only Pay VAT To The UK?
It is quite clear that when a seller makes a sale abroad, the VAT is owed to the place of the consumer. For example, if someone were to sell a product from the UK to France, the VAT would be owed to France as this is considered the place of purchase.
However, there is another rule that states if a consumer is paying for a product to be ‘picked up’ from another country, then the point of sale would actually take place in the country where the product resides, thus the VAT would be owed to that country. It is being alleged that this is what Sports Direct have been doing. Rather than the customer paying directly to Sports Direct for a product, they have in fact been paying Barlin Delivery to pick it up, meaning that the VAT would theoretically be owed to the UK.
Is Their Case Legitimate?
This is quite a complex case. Reports have claimed that shareholders have already communicated agitation over the company’s allegiance to Barlin Delivery, with reports suggesting that Mike Ashley attempted to pay Barlin approximately £11 million from Sports Direct.
Furthermore, the Financial Reporting Council, the UK tax watchdog who has flagged up Mike Ashley’s company for tax investigation, are concerned as to why Grant Thornton, Sports Direct’s former auditors, did not disclose the relationship between the two companies.
However, Sports Direct did confer with HMRC before making this arrangement and the HMRC apparently had no qualms with the scheme. In fairness, the EU Tax Directive in question, Article 33, was open to interpretation at the time. It is understood that HMRC did advise Sports Direct to check with EU tax authorities before proceeding with the scheme – Sports Direct did not feel this was necessary.
What Is Likely To Be The Outcome Of The Sports Direct Tax Investigation?
The most likely outcome is settlements with the aggrieved countries. It works in Sports Directs favour that the tax laws were slightly ambiguous before this year and they did confer with the HMRC.
However, whilst Sports Direct have claimed that they set the partner company up for ‘administrative simplification’ and not to lessen tax obligations, it is clear that many EU countries will feel as though they are owed some compensation. It is very unlikely that operations set up in this way will be permitted in the future.
Do You Need Help With A Tax Investigation?
At J&P, we have a team devoted to ensuring that you are always VAT compliant. We have strong experience in helping clients through tax investigations and our devoted team can guide you through the process every step of the way.
Please do not hesitate to get in touch should you have any concerns over your VAT returns, or you require assistance with a voluntary tax assessment to ensure everything is on track. You can contact us at firstname.lastname@example.org, or give us a call on 07734 182821.
As you probably already know, we at J&P specialize in helping ecommerce sellers expand their business. Whilst we primarily do this through tax services and logistics support, our long history of working alongside ecommerce means we can also offer you advice on other aspects of your business. One such aspect is your payment methods. The way in which you allow your customer to pay can be the difference between making a sale and losing a customer. This article will give you some tips on what your customers expect from your payment methods, which will almost certainly improve your ecommerce business.
If You Are A Cross-Border Ecommerce Business, Know Your Market
A typical mistake ecommerce sellers make is treating consumers from different countries the same. Each country has different tastes and needs when it comes to products. The same applies to payment methods.
For example, in the Netherlands (one of the best ecommerce destinations in Europe) use the payment service provider iDeal to make the majority of their online purchases. Others, such as the UK and Italy prefer PayPal. In some countries, such as Russia, it is quite common for deliveries to be paid for in cash upon arrival.
Ensure before expanding into a country that you have done research into what payment method their consumers like best. This also applies to which device they use, which brings us nicely on to…
Ensure Your Ecommerce Business Is Mobile Friendly
Mobile shopping and payments is a trend that has been growing for some time, but it has been accelerated further since the coronavirus outbreak. Since the lockdowns we are spending more and more time on our phones, and this is already having a knock-on effect for ecommerce.
It is thought that France saw the amount of mobile payments increase by 38% in 2020. The Netherlands saw a similar increase, reports showing that over 70% of the payments made using iDeal were made using a mobile phone.
It is imperative that you make your ecommerce business usable online. The fact that online cart abandonment stands at over 85% on mobile shows that consumers are being put-off by clunky check out processes. When it comes to adopting your business for new technologies, mobile phones are just the tip of the iceberg.
Embrace New Technology
Whilst this can sometimes be daunting, incorporating new technology into your ecommerce business can really set you apart from your competitors. Perhaps the easiest way to do this is by allowing buy-now-pay-later payments. Klarna was the company that made this payment method mainstream, but now Paypal offer a similar service.
If you are feeling more adventurous, experts are speculating that QR code payments are likely to really grow in popularity. It is thought that Paypal has a new merchant adopting the payment method every 38 seconds. This a low-cost contactless payment method to offer your customers.
Cryptocurrency is another really on-trend payment method. To be fair, there is still perhaps a little while yet before this currency becomes mainstream, but with its massive increase in popularity of the last year, it wouldn’t hurt to be early in adapting to incorporate this trend.
Check Your Payment Method Is Compatible With Your Market Place
If you read our article on ecommerce trends for 2021, you’ll remember that we really stressed the importance of adopting a omni-channel business model for ecommerce. One of the best ways to do this is through Online Market Places such as Amazon and eBay.
You have to be careful though when doing so that your payment methods are compatible and allowed by the marketplace. Amazon have their Payment Service Provider Program which only allows you to use approved payment service providers. Similarly, if you are selling on eBay you must ensure that your payment method is acceptable on their managed payments scheme.
Conclusion – If You Are An Ecommerce Seller, Adapt
Hopefully the above tips have gotten you thinking of ways to improve your ecommerce business. The options for payment method is certainly a factor for consumers when it comes to deciding who to purchase a product from, so ensure you make it easy for a customer to buy from you by ensuring your payment methods are up to date.
At J&P, helping ecommerce sellers is our speciality. We can help you expand your business all over the globe, through VAT registration and filing your returns.
Don’t forget, we have the qualifications and knowledge to help you plan ahead, so please do not hesitate to get in touch should you have any further questions about selling on online marketplaces, or if you need any help with adapting your business to comply with the new post-Brexit legislation and the upcoming OSS. You can contact us at email@example.com, on our social media, or give us a call on 0161 637 1080.
It is common knowledge that the UK Government have invested unprecedented amounts in order to support businesses and the economy throughout the pandemic. Whilst this spending has been met with justified praise, we haven’t yet been told how they are likely to recoup the money that they have borrowed. Many believed that March’s budget announcement would give us some clue, but the announcement was actually primarily concerned with committing to more spending. One way the government are likely to repay the money they have borrowed is through increased tax investigations. Bearing this in mind, now seems a good time to talk about what a tax investigation is and how to ensure you and your business are tax compliant.
What Is A Tax Investigation?
Fundamentally, a tax investigation is exactly what it sounds like. If the HMRC have reason to believe your accounts may be faulty they may decide to investigate you or your business to ensure you are paying the right amount of tax. The three types of tax investigation are as follows: aspect enquiry, full enquiry, and random check.
These are the most common form of tax investigations. This type of investigation entails the HMRC reviewing a particular area of your accounts where there are inconsistencies.
As with an aspect enquiry, a full enquiry type of investigation is exactly what you might imagine. If the HMRC believes there are significant problems with your payment of tax they may decide to carry out an investigation into all of your business records. This can sometimes include the affairs of the business director.
These are rare, but simply occur when the HMRC does a random check of a business. You do not need to have been at fault in any way for a random check to occur. They are, by nature, random.
What Kind Of Errors Could Lead To A Tax Investigation?
Sometimes, a check may be nothing to do with your own accounts. It is not unheard of for the HMRC to investigate a particular sector or industry if they feel there is an usual amount of financial irregularities in the industry.
However, in most cases a tax investigation will be the result of inconsistencies in your tax returns or late and error-ridden submissions.
The HMRC also may have reason to suspect you of tax irregularities if they receive a tip off. The Level of suspicion they have can also result in a longer investigation. Usually, investigations will look at your tax records for the last 4 years, but if they are suspicious enough this can rise to 6 year.
Moreover, you should be aware that these checks are not reserved only for income tax. You can be investigated for almost any kind of tax, such as climate change levy or capital gains tax.
What Do The Investigations Consist Of?
The HMRC can check if you are compliant at any time and you are obliged to cooperate. However, you can appeal their decision if you believe that their justification is unfair, but it will be up to them to decide whether your explanation for whatever irregularity that was found in your accounts is sufficient.
They will inform you if you are facing an investigation, and essentially it will consist of a lot of dialogue between yourself and the HMRC as they audit your accounts. They will ask questions about your operations and accounts, so be sure to get your affairs in order once the procedure has begun.
The investigation can take up to 16 months. The investigation will end with a decision notice and if you are found to have errors in your account there will likely be a contract settlement.
Is An Investigation More Likely At The Moment?
The short answer is yes. As stated in the introduction, the Government’s commitment to recouping the costs of all the coronavirus support packages means that they will likely concentrate on finding tax that they are already owed. It is a known fact that the HMRC miss out on billions of pounds each year in tax issues.
In addition, the recent implementation of Making Tax Digital will make it easier for tax irregularities to be flagged up. Thus, it is more important than ever for you to ensure that your accounts are up to date and submitted on time.
What Our Experts Say:
While almost all high street stores have been suffering heavily due to lockdown measures put in place, eCommerce in Europe and UK enjoyed a massive growth during the pandemic as the forced digitization of retailers and consumers has accelerated the ecommerce. This strong growth has been seen from all major online marketplaces.
For ecommerce traders, Online Selling Compliance Check is the particular tax investigation that HMRC regularly conducts. We can also notice that all tax authorities from major ecommerce markets (EU and UK) have tightened their regulations to detect and diminish tax fraud and to level the playing field in the consumer goods sectors.
HMRC has powers to tackle hidden UK businesses which are trading via online marketplaces. If they can’t make contact with the online seller or those traders remain non-compliant, HMRC will notify the online marketplaces, who will be made jointly and severally liable for future unpaid VAT. In this case, the marketplace has the option to remove the sellers rather than be liable.
HMRC’s report shown that they have issued around 6,000 of these notices between September 2016 and 31st March 2019. Besides, around 65,000 non-EU based sellers applied to register for VAT and have declared around £250 million in additional VAT.
In recent years, HMRC has also expanded their powers to obtain data from third parties. This data will be used to undertake focused compliance activity, and this makes it increasingly difficult for a small minority of businesses to hide their online income deliberately.
Other EU tax authorities have a similar approach to cross border e-commerce business. EU will apply the Ecommerce VAT Package from July 2021, which will make the VAT compliance issues stricter than before.
Conclusion – Tax Investigations Imminent
Tax investigations cases can be extremely irritating and they are naturally complicated due to large amount of data involved, interlinked regulations and multiple procedures to process.
Should you face one, you will have to dedicate significant time and energy to cooperating with the tax authorities. This is why you must double check all your accounts and make sure you avoid simple mistakes that could trigger an investigation.
One way you can do this is by employing the services of a dedicated and experienced accountancy team; that’s where we come in.
At J&P, we have a team devoted to ensuring that you are always VAT compliant. We have strong experience in helping clients through tax investigations and our devoted team can guide you through the process every step of the way.
Please do not hesitate to get in touch should you have any concerns over your VAT returns, or you require assistance with a voluntary tax assessment to ensure everything is on track. You can contact us at firstname.lastname@example.org, or give us a call on 0161 637 1080.
Regular readers of this blog might remember the FBA fee changes we mentioned briefly in our article on Amazon changes in 2021. As these changes come into effect from the beginning of June, now seems a good time to assess them in more detail. This article will look at the new way that the weight of your products will be calculated, as well as what is changing when it comes to storage fees and removal fees. Without further ado, let’s take a look into what is happening to Amazon Fulfilment fees next month.
Why Are Amazon Making Changes To FBA Now?
You might be wondering why these alterations are only being implemented now, as opposed to the beginning of the year like usual. Amazon delayed these fee changes in order to support sellers through the coronavirus.
Amazon invested heavily in FBA throughout the pandemic in order to keep up with the huge increase in demand for ecommerce. Since the coronavirus first became worldwide, Amazon have increased the square footage of their Fulfilment and logistic network by 50%. They even hired over 400,000 new staff.
You might think that the massive investment and expansion of Amazon’s Fulfilment network would have resulted in massive changes, but this is not the case.
What Are The Changes To Amazon Fulfilment Fees
The main points of interest for June’s changes are the removal of packaging weight when calculating the weight of a product and the realignment of weight categories. This means that the 4oz packaging that Amazon previously added to an items weight automatically has been removed. This could actually mean a heavy decrease in fees for some items.
For example, if you have a 12 oz product, this would previously have been considered a 16 oz product. Now, due to the fees being calculated just based on the products actual weight you could save just under 50% on FBA fees for this item.
FBA fees on the whole will be increasing modestly by about 2-3%, so make sure you are fully aware of the weights of all your items. You can check the changes for all the weights here.
FBA Removal Fees & Storage Fees
You will be happy to know that storage fees will not be increasing at all this year. This means you don’t have to worry about incurring any new costs for storing your items in a Fulfilment centre.
However, you should be aware that removal fees are actually taking a big increase. The median increase in removal fees is 28%. In fairness, this makes a lot of sense when you consider how much Amazon have to spend on the removal of items sellers forget about. This increase will likely convince sellers to be especially of their inventories from now on.
Due to the increase, you should definitely try to remove any unfulfillable stock from your inventories before June.
Conclusion – Minor FBA Changes, But Be Prepared
The fee changes to Amazon FBA are minimal on the most part, but sellers should definitely be aware of them in order to maintain profit margins. Ensure to check the new weights of all your items and adjust your profit margins accordingly. Also, don’t forget to make sure you have removed all your unfulfillable inventory before June!
Should you need more help, we would like to take this opportunity to remind you that our long history of working with Amazon and eBay sellers means we can offer you expert advice.
As well as helping with your Fulfilment, we would be more than happy to help you register for UK & EU VAT, the UK VAT deferral scheme, EU and UK EORI number, file your UK & EU VAT returns, and help you comply with VAT in case your account faces any issues.
The UAE is one of the best places for sellers to expand their business. After the EU, the UAE is the UK’s 4th largest export destination and enjoys 40% of all the UK’s trade with the GCC. With a thriving economy that is growing rapidly, the UAE represents a market that is overlooked too often by foreign sellers. This is likely due to the fact that they only introduced VAT relatively recently and so many exporters are apprehensive about attempting to register for VAT there. However, we at J&P are one of the few accountancy firms that can help you get VAT registered in the UAE. The process is not as difficult as you might think, since we do all the heavy lifting for you. This article will outline how and when to get registered for VAT in the UAE, and how we can help.
UAE VAT Requirements
The current rate of VAT in the UAE is 5%. For resident companies, they only need to register for VAT if their annual sales exceed AED 375,000, or are likely to in the next 12 months.
However, assuming you are a foreign seller, you will have to register for VAT in the UAE if you make any taxable sales there. You will also be required to follow the usual VAT requirements (submitting tax returns, charging for VAT etc.). You must ensure you are registered before making sales, as there is no implementation period.
Some products and services are exempt from VAT such as certain financial services and pharmaceutical products. Be sure to check diligently whether this applies to your product before attempting to export into the UAE.
How To Register For VAT In The UAE
The registration process follows the standard requirements in terms of the information you need to provide. This means basic information like business name and address will be required. Before beginning the application you will also need to create an account on the UAE’s online portal. The application can be filled in in English or Arabic.
As mentioned earlier, the UAE do not take kindly to late submissions, and you can face penalties if your application is late or faulty. The other issue is that, like with all GCC states, you must appoint a fiscal representative in order to export to the UAE.
Luckily, we at J& are experts when it comes to VAT registration and compliance in the UAE and can help you with the process, as well as filing your tax returns. We even have our own fiscal representative in the UAE which means you will not have to find one yourself. Get in contact today for a quote so we can help you expand your business into the UAE.
Other Requirements For Exporting Into The UAE
In order to get your goods through customs you will also need to present a Arab Certificate Of Origin. These certificates are used to confirm where your products are wholly obtained or manufactured. This document must also be in Arabic. Again, this is another service that we can help you with.
With certain products you must also check that reach the standards of the ESMA (the UAE body that sets standards on products going into the UAE). You must always check for any new standards or quality marks required before exporting into the UAE.
Conclusion – VAT Registration In The UAE
So as you can see, whilst the process of registering for VAT in the UAE can be difficult, through employing our services the process is made much simpler, and you can expand your business into one of the fast growing ecommerce economies in the world. You should also take a look at our guide for getting VAT registered in the KSA.
Our long history of working with ecommerce sellers, especially those who use Amazon and eBay, means we can guide you through every step of the registration process. Furthermore, your expansion does not only have to be limited to the Middle-East, as we would be more than happy to help you register for UK & EU VAT and file your UK & EU VAT returns, and help you comply with VAT in case your account faces any issues. So please do not hesitate to send us an e-mail at email@example.com or give us a call at 0161 637 1080.
2021 has been a stellar year for eBay. As their first quarter earnings release is imminent, it seems the perfect time to take a look at some of the recent changes the online marketplace has made in response to feedback from their sellers. If you are an eBay seller you should definitely be making the most of these new changes. Also, don’t forget that we at J&P help countless eBay sellers each year expand their business, so get in contact if there are any tax-related or logistical services we can help you with. Without further ado, let’s talk about eBay’s new changes, and how you can optimize your listings.
eBay Replace Fast ’N Free With New Postage Message
The Fast ‘N Free badge has been a staple on eBay for almost 10 years now. The badge allowed buyers to see which items could be received in 3 days. When the badge was introduced in 2012, this was considered quite quick – ecommerce sellers will know that this is now considered standard.
In order to respond to consumer demands for faster deliveries, eBay have replaced the badge with a simplified postage message which simply informs the buyer as to whether they can expect their item in one, two, or three days.
This makes eBay itself a more attractive platform for users, and thus your listings will be exposed to more eyes. If you can offer deliveries faster than 3 days then be sure to update your listings.
Improvements Made To eBay Promoted Listings Ads
Essentially, eBay have given sellers the ability to make their ‘promoted listings ads’ automated. The promoted ads work by charging the seller a percentage of the sale price when a buyer purchases an item within 30 days of clicking on the ad. The fee for the sale will be calculated based on the ad rate that was live when the ad was first clicked.
Now, sellers have much more control over their ads. In order to protect profits, eBay sellers are now able to set ad rate caps and view suggested ad rates. The hope is that the new feature will allow eBay sellers to ‘set and forget’ their ad campaigns. This will undoubtedly lead to a more productive ad system.
Seller Access To Research Data Expanded
Previously, eBay’s Product Research Tool was only available to sellers who had a paid subscription to an eBay store. As of this month, the tool is now available to all sellers.
This is arguably one of the biggest changes to the platform. Insights are invaluable for sellers to find out what is selling and for how much, in order to adjust their own listings. The insights are even as detailed as to what percentage of your competition is offering free shipping.
If you are selling on eBay, you should definitely be making the most of these insights and editing your own listings accordingly.
eBay Introduce Coded Coupons
Another interesting change is the introduction of coded coupons. This feature will allow sellers to create their own coded coupons in order to share discount codes for their products. There is quite a lot of freedom for sellers to decide how they want to share the code. Once created, sellers can either opt to share the code privately with existing customers, or publicly on the platform itself.
The feature is available through Seller Hub Promotions to all who are shop subscribers. The system is easy to use as you simply create a code and select the products you would like to discount. You are guided through the process step-by-step, so don’t be apprehensive about trying out this new feature!
There is likely to be more changes through 2021. One change we already know that is coming is video capabilities for listings and storefronts. Already available in the USA, this feature will allow you to add videos to your image galleries. Making the most of innovations like this will really help your listings stand out.
In order to stay up to date with all the latest eBay changes, be sure to follow our social channels.
To Conclude, Make Sure You Are Making The Most Of The New Features
These changes are really indicative of the amount of work eBay are doing to offer sellers a better selling experience. If you use all the above features to their full potential, you will almost certainly see a considerable increase in sales and profits. Before you go, be sure to check out the changes that Amazon have made in 2021.
Don’t forget our long history of working with eBay and Amazon sellers means we can offer you expert advice, so please do not hesitate to give us a call on 0161 637 1080 or send an e-mail to firstname.lastname@example.org. We would be more than happy to help you register for UK & EU VAT, the UK VAT deferral scheme, EU and UK EORI number, file your UK & EU VAT returns, and help you comply with VAT in case your account faces any issues. We can even offer storage and warehouse support!