Ecommerce business expenses in the UK: import VAT, the £135 threshold, and marketplace fees

An online seller’s books look different from a high-street shop’s: most suppliers are overseas, most fees come from platforms billed in another country, and the VAT on imported stock is paid to a customs system rather than to the supplier. Get the import VAT mechanics and the marketplace-fee treatment right and the rest of UK ecommerce bookkeeping is ordinary. All figures below are sourced from HMRC guidance in the Sources section.

Importing stock and the £135 threshold

Where your stock comes from decides how the VAT is handled. Consignments worth £135 or less that are outside the UK and sold directly to a customer in Great Britain have UK supply VAT charged at the point of sale; for consignments over £135, normal import VAT and customs rules apply on importation ^[1] .

The key reflex for a seller importing its own stock: the overseas supplier’s invoice is not the document on which you reclaim UK import VAT. The customs paperwork is.

Reclaiming import VAT: C79 or postponed accounting

There are two routes. Pay import VAT at the border and reclaim it with the C79 import VAT certificate, or use postponed VAT accounting (PVA): declare and recover the import VAT on the same VAT return, supported by your monthly postponed import VAT statement, rather than paying it upfront ^[2] .

PVA is a cash-flow win for an importer, because the VAT never leaves the bank. Either way, the reclaim is evidenced by the customs statement, which is why a careful ecommerce ledger records the import as the cost of goods and the import VAT against the statement, not the supplier invoice.

Marketplace and payment-processor fees

Selling fees (Amazon, Etsy, eBay) and processing fees (Stripe, PayPal) are operating expenses, not cost of goods sold. Their VAT treatment turns on where the platform is established. Fees from a UK-registered entity carry UK VAT you reclaim normally; fees billed from an overseas entity for a B2B service generally fall under the reverse charge, where you account for the VAT yourself and recover it on the same return ^[2] . The invoice will show the supplier’s VAT status, so it pays to read it rather than assume.

Cost of goods versus operating expenses

Cost of goods sold is the purchase price of stock plus directly attributable costs (inbound freight, import duty). Marketplace fees, advertising, software subscriptions, and packaging consumables are operating expenses. Splitting them cleanly is what makes gross-margin reporting trustworthy, and it is the split most often muddled when fees and stock both arrive as foreign-currency charges.

Where ExpenseFlow fits

Ecommerce throws off a high volume of cross-border invoices in several currencies: stock from overseas factories, platform fees, ad spend. ExpenseFlow captures each receipt and supplier invoice, extracts the line detail and the currency, and syncs the transaction into Xero or QuickBooks Online with the source image attached for the six-year record-keeping window. Its cross-border checks flag when a purchase is from a foreign supplier that has not charged UK VAT, so the invoice is recorded as a foreign-currency cost rather than wrongly treated as carrying reclaimable input VAT, and they point you to the customs document (the C79 or postponed import VAT statement) as the real reclaim source. It does not calculate your import VAT, file your VAT return, or split cost of goods from operating expenses for you: those stay with you or your accountant. What it removes is the manual keying and currency juggling behind a high-volume online ledger.

Common mistakes

• Reclaiming import VAT from the overseas supplier’s invoice instead of the C79 or postponed import VAT statement ^[2] .
• Treating a sub-£135 consignment as an import when UK supply VAT was actually due at the point of sale ^[1] .
• Assuming all marketplace fees carry reclaimable UK VAT when overseas B2B fees fall under the reverse charge ^[2] .
• Lumping selling and processing fees into cost of goods, which distorts gross margin.