VAT Registration

I'm not sure how much information we are allowed to share here, but this is my store which has just been suspended I believe due to VAT information missing 

https://www.etsy.com/uk/shop/EvergreenUKBoutique

the store is 3yrs old, last year I received many automated emails stating my store may be suspended if I fail to include VAT information as a business. My accountant advised me to register for VAT you must meet the threshold, which I don't, and that I do not register for it until this time.

I contacted Etsy to express my concerns and they advised that it was an automated email and not to worry.

In December 2024 it looked at though I may reach the threshold for the very first time and be able to register, but the year closed on it still being below and so it was not the case. 

Since December 2024 my sales have dropped by 50% which is shocking as they've only ever grown and flourished with thousands of happy customers as I work 7 days per week to support my family.

Now in June 2025, 6 months after almost meeting the VAT threshold, my store has been suspended without warning, when I am the further from the VAT threshold what we've ever been. There is no way to contact Etsy, I can't live chat or speak to staff and I can't reopen my store. I am a single autistic parent with sole income from my Etsy store and have bills to pay. Please can somebody help me. I don't know what to do.

My only option is to enter a valid VAT number to restore my shop, which I'm nowhere close to being eligible to even register for. 

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Marmalady
Conversation Maker

Re: VAT Registration

You do not have to wait until you meet the threshold to register for VAT

If you reach the threshold ( around £85,000 I think -- not sure of the exact figure) you must register, but you can choose to register below that amount

Because Etsy needs to have the VAT number as soon as you hit the threshold, they start asking for it whilst you are still below so that it prompts you to get ready for when you do hit the threshold.

Etsy also works on a January - December year for calculating your yearly income , not the April - April year that HMRC uses

You have 2 options:

1 Continue trying to contact Etsy : How to Reinstate Your Suspended Account – Etsy

2 Register for VAT even if you are not near the threshold for compulsory registration. Think carefully before going down this route as there is a lot of extra work involved in being registered -- including quarterly VAT returns.

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FancyTogs
Community Maker

Re: VAT Registration

 

You can voluntarily register for VAT below the threshold, it is advisable to register before you exceed the threshold.

There are some good reasons for sellers to register for VAT voluntarily even if nowhere near the threshold, in particular:

  • if running at a loss
  • if making large capital equipment purchases
  • if making products that are zero rated for VAT, eg. children's clothing, the purchase VAT on materials can be reclaimed, but there is no VAT on sales
  • if exporting a lot, so zero rated sales again but you can reclaim VAT on purchases

In these cases when the VAT on purchases exceeds the VAT on sales you can get payments from HMRC. The VAT reclaims on purchases can be a significant income stream.

 

You may be closer than you think to the VAT registration threshold because the turnover calculation includes your Etsy shop fees, really. This is because the shop fees are a "reverse charge of services", due to Etsy being outside the UK. For VAT purposes the shop fees have to be added to your sales so that the VAT can be reclaimed on your purchases.

The Etsy payment processing fees are not included in the turnover calculation, as they are "merchant acquiring fees" which are exempt financial transaction fees. Their exempt status was confirmed to us by HMRC but other sellers have been given different answers by HMRC. The difference could be due to terminology, because in HMRC-speak "payment processing fees" are fees charged to buyers when making a purchase and are therefore standard rate VAT.

 

If you are likely to become VAT registered you need to have squeaky clean and really tight accounting records system. Get it organised and running well before your first VAT return. 

VAT registration requires MTD (Making Tax Digital) VAT reporting. You can either use compatible accounting software, or have a means of file transfer of your VAT report from your existing accounting system. There are a variety of free services that enable the file transfer option.

 

 

Lawrence (Clare's other half)

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FancyTogs
Community Maker

Re: VAT Registration

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FancyTogs
Community Maker

Re: VAT Registration

And about "overseas sales", this causes a lot of confusion:

As sellers we think of overseas sales as anything being delivered to overseas addresses.

HMRC's VAT terminology for location is based on where the goods are sold from, not where they are delivered to, nor where the buyer is located.

So for VAT purposes "overseas sales" are goods which are despatched from an overseas location, and are outside the scope of UK VAT if not being sold to the UK.

Sales of goods that are outside the scope of UK VAT are not included in the VAT threshold turnover calculation.

So, for example:

  • a UK based POD seller would not include sales shipping from the USA to EU addresses in their UK VAT registration turnover calculation.
  • a UK designer with a production partner in China would not include sales of goods sent from China directly to Australian addresses in their UK VAT registration turnover calculation.

However all sales of goods sent from the UK to any other country are included in the UK VAT registration turnover calculation.

Always get advice from HMRC on the details, their VAT help line is very helpful, but make sure that you clarify the meaning of any terminology used. 

 

Lawrence

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Re: VAT Registration

Anyone can register for VAT, even with £1 income

If your accountant says otherwise, change accountant.

..........

Etsy is jointly liable for VAT, so if they don't get your number, and any is due, then they have to pay it.

Therefore, they start warning you quite early, that you will need to register to sell here, so you have plenty of time to register
and when you get nearer to the threshold, then they will tell you to register, or you can't sell here any more, which they did.

Do not ignore messages like this from etsy. The message is automated, and so is the closure.

Etsy looks at calendar year, so they are looking at Jan-Dec 2024

They can put the number to register at whatever they want, but it is definitely lower than the compulsory threshold, to protect themselves.

You will either have to remain closed, until etsy does the 2025 calendar year calculation
or register for VAT

There are no other options.

 

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