Here are some of the most popular questions we field from Ecommerce sellers searchable and organised by topics such as starting out, VAT, tech solutions, fees, etc.
Don't believe an accountant that tells you that you need an accountant straight away! This is a matter of preference. There are good reasons for appointing an accountant straight away, but there will be times when it does not make sense to do so. It comes down to your preferences and objectives.
The key constraint is when is your first reporting obligation. Understand when this is (you can read a detailed treatment of this question in our Accounting Timing and Obligations post) and target appointing an accountant with enough time for them to handle this. Company formation and Payroll can be done in a matter of days. A full year of bookkeeping and accounts prep, allow a couple of months so that things are not rushed.
Subject to the above constraint, you choose when to appoint an accountant based on your requirements. The overall price that you pay does not change:
There are pros and cons with both and which you choose will depend on your objectives. Have a read of our Sole Trader vs Limited Company post for a fuller discussion.
Tax used to be a real driving factor behind this decisions (LTD's were tax advantaged) however, successive Budgets have aligned the treatment.
If you are planning to extract all the profit from the business each year, then the most tax efficient structure varies based on the level of profit. You can see for yourself how this works by downloading our tax calculator for 2020/21.
If you are looking to grow your business, the liability protection and greater cash flow flexibility of a Limited Company tends to be of more importance. This is because a Limited Company's profits are taxed at 19% whereas a Sole Trader is taxed on profit as income tax (which for higher revenues results in a higher tax rate, however the money is now yours, taxed). So, a Limited company therefore has more cash it can use to fund growth (assuming your effective personal tax rate is higher).
The last main consideration is subjective: certain businesses prefer to deal with Limited Companies. Being a Limited Company (and a VAT registered one to an extent) signals that your business is more professional and more likely to be a long-term partner.
As a guide, below roughly £200k annual revenue, the split is 50:50, and after this point most Sole Traders would incorporate so there are very few Sole Traders still active above this level.
Timing does also play a part: starting a Sole Trade late in the personal tax year means that you will pay for full Sole Trader tax return even if you were only active during part of it, whereas for Limited Companies, the tax year is based on when you set up your business.
You have to register for UK VAT as soon as:
You have the option of registering voluntarily but this is rarely advantageous for ecommerce sellers. It does happen, however, typically only if one of your suppliers will only deal with VAT registered businesses. For full details review our VAT for ecommerce posts.
An accountant's job is to help you comply with business law and reporting obligations, save you time in doing so, and in general to provide advice and guidance for managing your business, with a focus on the financials.
A good accountant will get your bookkeeping and reporting done right, submitted on time, every time. They should have processes in place to ensure that deadlines are not missed, make it easy for you to provide the required information, and keep you informed about why and how your obligation are being met. All of this should be done in a manner that protects your time and saves you stress, so that you can focus your time and energy on your business.
There are five core compliance requirements you need to be aware of:
We offer each of these services so that all of your compliance requirements for UK accounting can be met in one place.
We are fully transparent on pricing and you can see exactly what you would pay for services on the Instant Quote page. There are five compliance points/services you may need for running a UK business: Accounting, VAT, Bookkeeping, Payroll, Self Assessment.
Not all of these will be relevant for all business which is why you can select any or all of these services.
The Bookkeeping and VAT fees you will see in the calculator are charged in arrears (good for your cash flow) once the activity in the VAT/bookkeeping period is known. Accounting is charged monthly based on your estimated revenue and an adjustment is applied at year-end once your actual revenue is known to align your overall fee with 12 x the correct monthly fee.
We do not charge set up fees. We want to ensure that you are correctly set up from the very beginning as it saves you and us time in the long-run.
For VAT, if it is your first VAT return, you are able to reclaim input VAT on service up to 6 months prior to your registration date, and goods still held in inventory purchased up to 4 years prior to your registration date. Depending on the extent of additional work, your first VAT quarter price may be higher than your standard price.
It is a monthly rolling contract. You can disengage from our services at any time for any reason and you will receive a refund in full for any services not used, subject to a fee to cover any admin or advice cost rendered in the year.
As a guide, if you left us after the first month, no refund. If you leave us after 6 months, 5 months refunded. If you leave us after 13 months and we have already started your return, we will finish this for you, and refund 1 month of fees.
Bookkeeping and VAT fees are charged in arrears in respect of the bookkeeping/VAT period just completed. If we have started the work we will finish it for you. If we have not startedm full refund.
You are billed based on which of the five compliance services you have selected:
The answer tends to depend on what you are optimising for. Some select us based on our extensive experience handling ecommerce businesses for the peace of mind. Some select us in order to save them time based on not needing to explain how their business/platform/dropshipping/etc. works, our efficient processes for handling ecommerce or the fact we get your Sales data for you. And some choose us because they have been paying higher fees to a non-specialised accountant who is charging hourly but being inefficient in the delivery.
It tends to come down to a combination of having confidence that your accounts are being done right, time savings, and value for money.
If you would like to use our services, the quickest way is to use the Instant Quote form (which shows you prices in real-time) and submit your details along with any initial queries you have. You don't need to get the details and services in the quote exactly right, the tool exists to give you a clear idea of what we would charge based on varying levels of business activity.
When you submit, you'll receive a copy of your quote with the final figures you chose, with a member of the Ecommerce Accountants team copied in (in case you have raised an initial query or if you want to follow up on your quote.
If you understand our services already, e.g. if you've already spoken with us, or have read enough in our FAQs and Blog posts, then you can use the the sign-up link in this email to proceed and review and sign our terms. We then schedule a welcome / discovery call to confirm services and introduce ourselves.
If you have further questions, we'll address these on email or arrange a call to discuss further.
If you have outgrown the expertise of your existing accountant, you would like to access a higher service level, save time, or the costs for hourly accounting are spiralling out of control, then we can help.
There is a standardised industry protocol for switching accountants called Professional Clearance. You can sign up at any point, and when it comes to getting you onboard, if you have an existing accountant we will contact them to request a copy of the latest filings they hold for your account. This process is normally quick, depending on your previous accountant's response time, but it will not prevent us meeting any of your upcoming deadlines if there are any.
Unlimited advice is included. You are able to access unlimited advice as part of our Accounting service and we do this because we want to ensure that you are entirely comfortable asking us questions at any time, rather than us needing to fix avoidable issues at year end. In the long-run this is more efficient and comfortable for both of you and us.
You can ask about any compliance point you like, and if it is a UK tax question we will be able to provide you a quick and clear answer (and for the majority of queries we will have received this query before). For non-accounting or non-UK tax questions we will do our best to provide a helpful answer and guide you to the right resource.
You have a dedicated accountant and bookkeeper (if you select this service) who will be your regular contact point.
Communication is either by email or you can book in for a phone/video call at any time. For anything that's urgent, you can also phone the office; we triage our inboxes throughout the day to ensure time-sensitive queries are handled quickly.
We triage our inboxes throughout the day to check if we have received any urgent enquiries. These are typically responded to same day, although if something is truly urgent I would encourage you to simply phone the office!
For normal queries we receive from you, you can expect a response within 48 hours. If we have not responded within 3 days (which is rare) we'll send an email to explain what the hold up is.
We often get asked if we can use other communication methods like Telegram and WhatsApp instead of just emails and calls. This would be nice to offer but the efficiency cost to us of maintaining further channels is too great; email and scheduled calls are compatible with workflow management processes, and lets us ensure every query gets answered and nothing gets lost.
Visit our Process Maps page where each service has been mapped visually so that you can get a quick overview of timeline, which tasks we do (on the right hand side in pink), and what you would need to do (on the left hand side in grey).
For each of the processes (apart from new client enquiries) for the tasks that we need you to do (most commonly uploading documents and confirming yes/no if something applies to you), you will receive an electronic checklist to make it simple for you to provide the information we need and when to do it. This is the same tool we use to keep track of your work and deadlines.
One of main aims is to deliver you a service that saves you as much time as possible. For that reason, we take as much off your plate as possible, including getting your Sales data for you. For every service, there is a process in place to minimise the work you do and maximise our efficiency. You can see a summary of each process on our Process Maps page.
The main points where an accountant can save you time are in getting Sales data for you, using efficient tools for gathering your expenses and invoices data, and not needing you to explain how your business works or what certain things in your Amazon/Shopify/Etsy report mean. With us, we get your Sales data without you having to do anything, use Receipt Bank for efficient invoice capture (you just email expenses to an address or upload in bulk), and we deals with hundreds of ecommerce businesses like yours.
This varies based on the service, but in the UK, the general rule is that you need to keep records for 6 years. We will let you know exactly what you need whenever a reporting period is ready to be prepared, but you if you would like to know in advance you can read our "What records do I need to keep?" post for more detail.
As a brief summary, keep a digital copy of all paper expenses at a minimum, e.g. using a Google Drive. Ideally, file any elctronic invoices/emails into a single folder for easy retrieval. For personal taxes, keep all of your end of year employment documents (e.g. P11D, P45, P60), any end of year interest statements from non-ISA bank accounts, and a record of any income that is not taxed at source (e.g. rental income, sales of shares outside of ISA accounts, Sole Trader work, etc).
We do. If you are based outside of the UK and you wish to set up a UK company, then the UK registered address requirement is taken care of by this service. Similarly some clients wish to maintain privacy by not using their home address visible publicly on Companies House.
As part of the service, we open and handle any HMRC and Companies House correspondence for you. Please note this is not a mail forwarding service, i.e. our address is used only as your Registered Address, not your correspondence or trading address.
Bookkeeping is the process of classifying all of your business' transactions into their appropriate accounting categories and reconciling these transactions to evidence (tidy record keeping), such as Sales reports from your ecommerce stores or invoices and receipts for your expenses.
It is a requirement for preparing VAT and annual returns. Note, when you are VAT registered there are additional requirements for you bookkeeping which most accounts will capture as either a VAT charge or an increased bookkeeping fee (our approach is the former).
We are specialised and efficient at handling bookkeeping for ecommerce, but it is not a requirement for us to handle it. You can handle it yourself or use an in-house bookkeeper, in which case we are happy to work from your completed bookkeeping, subject to passing our basic quality test (because we cannot knowingly prepare returns based on incorrect bookkeeping).
Bookkeeping is the process of categorising all of your business' transactions into accounting categories (called a Chart of Accounts). Accounting is the preparation of your various annual reports based on the breakdown of transactions for the financial year, which is the result of completed bookkeeping.
Bookkeeping is an add-on service to Accounting, i.e. bookkeeping is required for creating accounts but the bookkeeping can done by you or you in-house bookkeeper, or you can outsource it to us to do for you, something we are happy to do. We do not currently offer a bookkeeping-only service.
We are Xero specialists and have earned the Gold Partner Champion designation. We use Xero because it lets us be super efficient at handling bookkeeping, provides excellent reporting, a broad range of integration and the best coverage of banking providers for automating your bank feeds.
If we are handling your bookkeeping, the first thing that happens is that we schedule a set-up call where we do a health check of your existing Xero, or set up a new Xero account from scratch / transfer from another bookkeeping solution. We'll enable your direct bank feeds and walk you through how to leverage Xero's powerful reporting.
We use a software called Receipt Bank which seamlessly integrates with Xero for expense management. The beauty of Receipt Bank is that capturing invoices can be reduced to simply forwarding an email, attachment, or picture to an email address for your own account. So for example, if you have a regular supplier you can simple set up an auto-forwarding rule to automate capturing the invoices for purchasing inventory. For arbitrage sellers, you can use their app to capture expenses by just taking a picture in-app.
We choose Receipt Bank because it currently offers the highest fidelity for reading expenses based on it's machine learning OCR engine, which lets us be a lot more efficient.
We do not charge differently for bookkeeping for various marketplaces. This is because we have defined processes for handling the data from all of the major ecommerce platforms and payment gateways, that allow us to be similarly efficient regardless of marketplaces. This lets us simplify our charging structure by reference only the total number of orders and the number of payment gateways and marketplaces we have to reconcile (rather than splitting it out per marketplace/gateway).
Currently we handle bookkeeping for all Amazon marketplaces, both FBA and FBM, Shopify and several of its payment gateways, Wix, Magento, Etsy, eBay, Shopwired and a few niche ones. If you are on a marketplace we have not encountered before, we will typically charge a slight premium for the first bookkeeping period which will depend on how complex parsing the data from this payment gateway or marketplace is.
The most popular marketplaces amongst our existing clients are:
For each of these marketplaces we already have a system in place for handling their sales data reporting and can offer standardised pricing. There are a large number of additional less popular platforms that we support, so feel free to enquire. We are happy handle any ecommerce platform, but where it is a new platform for us, we would offer bespoke pricing if we need to set up a new process and parse a new data report.
The minimum frequency is dictated by your reporting obligations, so if you are VAT registered then the minimum is quarterly. If not, you have the option of only doing your bookkeeping annually.
The maximum frequency is dictated by how much value you get from handling bookkeeping beyond the minimum requirement. Completing your bookkeeping enables you to obtain management reporting, such as P&L reporting and Balance Sheet, which you can access easily within your Xero account (we will show you how if you would like this). In practice, this means that most small and mid-sized businesses opt for quarterly bookkeeping, with larger businesses that rely more on management reporting for strategic decisions opt for monthly.
We currently discount the fee vs the price for monthly bookkeeping by 25% for quarterly and by 43% for annual bookkeeping.
There are two relevant VAT schemes for ecommerce sellers, the Flat Rate Scheme and the Standard Rate Scheme. Other schemes exist, but with the exception of sellers of used goods, these are irrelevant.
The Flat Rate Scheme is designed to reduce the admin for smaller businesses and is only accessible if your annual revenue is less than £230,000. With this scheme you pay c. 6.5% VAT on all of your sales and can only reclaim VAT on purchases of assets whose value exceeds £2,000.
The Standard Rate Scheme is available to all businesses. You charge 20% VAT as part of your sale (with the exception of certain 0% rated goods, like coffee, kids clothing, etc.) but are able to reclaim all input VAT, e.g. VAT on services like accounting fees, on the goods bought, and the import VAT identified on your C79 certificates.
Handling Flat Rate submissions is slightly less work as a result and we charge slightly less for handling such returns for this reason.
An EORI (Economic Operators Registration and Identification) number is a unique identifier required by businesses that import or export goods into or out of the EU. In the UK for example, it allows HMRC to identify which business has paid the import VAT on goods, which is required for reclaiming on your VAT return.
You can obtain your EORI number as part of your VAT registration. If you do not get one, you may have increased costs and delays. For example, if HMRC cannot clear your goods you may have to pay storage fees. Visit HMRC's guidance on EORI page for further detail.
We do not currently use invoice posting solutions such as A2X or Link My Books to fetch Amazon or Shopify data when we are handling your bookkeeping. However, many of our clients who handle their bookkeeping themselves do, and we would actively encourage you do so too if you are also considering handling bookkeeping yourself. There are plenty of good reasons to invest in using such a solution if you are going to handle the bookkeeping yourself, the principle reason being time-saving.
We facilitate the set up of several of these solutions, so if you are considering using one, get in touch and one of our accountants can help to ensure you are set up correctly from the start, as well as walking you through how to handle the non-platform transactions, i.e. your expenses, supplier costs, salary, etc.
Where we handle the bookkeeping for clients, we fetch and process the raw data internally, which means we can run additional reporting and checks, principal among them being checking for SKUs with likely misconfigured tax rules.
Yes, we are. We are Making Tax Digital (MTD) ready and use MTD compliant software, such as Xero, to complete submissions.
Making Tax Digital is a part of the UK government’s plan to make it simpler for businesses to handle their tax affairs. It means that you now need to keep records digitally and use software for creating certain submissions. At Ecommerce Accountants we are fully compliant with the Making Tax Digital rules and our systems and processes are built with this requirement in mind.
EU VAT is only handled in the local language, a decision taken by the respective tax authorities to minimise the risk of translation errors. For this reason we offer VAT services for the UK only where we are specialist.
For our global sellers the UK return is typically handled by is because it is the more complex return as this is the one where input VAT is normally reclaimed. Also because we tend to be more cost-effective for a UK return due to our specialism.
There are two global VAT houses we currently recommend to our clients based on consistent positive feedback on their service levels.
The distance selling thresholds apply to European sales within the EU. For most countries the threshold is €35,000 with notable exceptions being German, Netherlands, and Luxembourg at €100,000. For the UK the distance selling threshold is currently £70,000.
So, if you are selling goods from Europe, i.e. shipping from the UK and the total value sold to customers in a country in a calendar year is less than the country's threshold, then no need to register. If above the threshold, you need to register there and in your own European country if you haven't already.
Note, this threshold is different to the domestic threshold which also has to be monitored.
If you store inventory in a warehouse in a European country that is not your business' home country, you have to register straight away, i.e. your VAT threshold becomes zero. So if you are a US, or non-UK European business and you ship goods from the UK to your customers (no matter where they are) you need to register for VAT.
The exception is if you are shipping goods from your business' home country. For example for a UK company, there is a threshold of £85,000 (looking back 12 calendar months), below which you do not need to register for VAT (subject to not having exceeded any of the Distance Selling thresholds.
If you are a dropshipper using a Chinese supplier, e.g. AliExpress, then most likely these sales will be considered out of scope for VAT. Have a read of our VAT for Dropshippers post for a more detailed treatment.
For this to be beneficial to your business, the VAT you pay needs to exceed the cost of filing VAT returns. If you are predominantly using Facebook for advertising, you are not paying VAT on this cost as Facebook uses the reverse charge mechanism (i.e. it does not charge businesses VAT, regardless of VAT registration). You can use our Instant Quote to get an idea of the cost of handling your VAT returns and VAT registration; if this exceeds what you might reclaim, then you should not register.
The correct answer will depend on a number of factors, so ask us when you are ready to extract money from your business. Visit our Tax Calculator page for some straightforward guidance that applies for most cases. In summary, ensure that:
We provide advice on all of these points as standard as part of our Accounting service.
If you sell digital services or digital products, you would need sign up for the VAT MOSS scheme in addition to registering and submitting VAT returns as normal. In practice, this is fairly straightforward and we are able to offer this service for £20 per month on top of the standard VAT fee.
The scheme exists because each European country wants a cut of the VAT pie if you sell to its citizens. Note, one of the tests for a service qualifying as a digital service is that it is offered without human intervention. This means that an off-the-shelf downloadable course would count as a digital service, but if you speak with the customer and curate the correct downloadable content to suit their specific needs, then this is now just a normal service rather than a digital service and the additional VAT requirements fall away.
if you are a Limited Company you will pay yourself a mix of salary and dividends typically to optimise for tax. Note, as soon as you pay a salary you have a reporting obligation, so ask your accountant for advice before you do. Visit our Tax Calculator page for guidance on what mix to use. For a Sole Trader it is a little simpler. Simply keep a record of how much you have taken out and move the funds into your personal account.
In short, if you are a Sole Trader, this question is not relevant. For 2020/21 tax year, for a limited company you would normally pay yourself either £8,788 or £12,500 if your business can claim the Employment Allowance. This assumes however that you have no other income. The remaining profit is paid in dividends.
We are a Gold Partner with both Xero and Receipt Bank, which means we are able to pass on a discount on your bookkeeping software to you. The combined RRP for the packages we provide you is £70 + VAT but with the discount, the cost to you is £37 + VAT per month instead.
We also provide an early-bird discount on your Self Assessment fee for bringing us your documents early in the personal tax year. On pricing for ecommerce businesses with standard requirement we do not offer discounts.
We treat all of our customers fairly and as part of that everyone receives the same treatment when it comes to pricing. We only provide discounts reflecting actual reductions in workload or greater efficiency, so for example if we run two business for you, the second business we would normally extend a 5% discount, reflecting that we have already explained all of our processes and there will be some overlap in the advice provided. If you run a consulting business or property company, separately to your ecommerce business, we can handle the accounting for this as well, usually at a discounted rate (because a contractor business is usually far simpler to handle the bookkeeping and accounting for).
Yes, tax advice is included as part of your accounting fee and you can access unlimited advice. Our preference is that you are complete comfortable asking us anything about how to deal with accounting and compliance at any time. This saves both you and us time in comparison to us having to go back and fix something avoidable at year end.
Additionally, wherever possible, we can show you what best practice looks like, how to optimise your tax bill, and advise on how tax law affects you. Where we are doing regular bookkeeping for you, we can proactively advise on when you are nearing relevant VAT thresholds, and we also do a number of proactive checks for tax misconfigured SKUs, something we are able to do since we work with the raw data from each merchant platform.
If you would like us to handle your pensions auto-enrolment requirement we can do this for you. We would enrol in you the government scheme, NEST and would handle your ongoing monthly reporting. We charge £120 + VAT for handling an auto-enrolment registration and then £3 per employee for whom we are doing pensions reporting.
Money Saving Expert's Auto-Enrolment guide gives you a great overview of how this works from the point of view of the employee. For the employer, you can read up about it on the NEST auto-enrolment for employers guide.
We do not handle international tax but we provide varying levels of guidance for certain non-UK taxes. For example, for EU VAT we get provide extensive guidance; for US Sales Tax we can explain how this works and walk you through best practice / point you at relevant providers (have a read of our 1-min primer on Sales Tax for example). If for example you are looking to set up a Bermudan or Cayman entity, unfortunately we cannot help!
A popular jurisdiction we get asked about is if it makes sense to incorporate in Ireland in order to save slightly on Corporation tax. Eventually this level of tax optimisation may make sense for your business, once you have substantial profits. In the earlier stages of running a business, the additional time cost and accounting cost associated with running an Irish company tends to leave less in your pocket and makes this an unattractive option.
For US Sales Tax and compliance we can provide guidance only, but we cannot file or advice in an official capacity as it not a UK or EU tax. We speak about this topic regularly, and can provide some helpful details on considerations and the most common technical solution used by our clients, the most popular solution being TaxJar*. This is fast-moving area of tax law, and tax legislation has not yet caught up with how ecommerce has changed what selling looks like in practice.
As a quick primer on the topic: the rules are complex, more so than with VAT, as Sales Tax varies by product, State (and sometimes city within the State), where your customer is, and where your product is shipped from. The test for whether you have to file in a state is typically based on whether you hold inventory in that state (for example if you are Amazon FBA in the US) or if you have a certain level of economic activity in a state, with most thresholds starting at $100,000 revenue in a year or more than 200 orders (these thresholds vary and one state has zero threshold).
As a result the cost of compliance in the US can be in the region of $25,000-$40,000 if you are active in each state. Lower if you use a software like TaxJar, but still far higher than handling VAT. For this reason, the reality is that many businesses with lower revenue will opt to ignore their Sales Tax obligations on the basis that the risk they face of non-compliance is lower than the cost of compliance. Larger businesses, with greater revenue (i.e. greater tax liabilities and potential fines), and more to lose, who can afford this compliance cost simply view this as a cost of doing business.
*This is an affiliate link which earns you a discount and us a referral commission. Here is the the unaffiliated TaxJar link.