Categorizing Etsy VAT transaction when not VAT registered?

Kael · ‎August 02, 2024

Hi,

I'm a UK seller and use QuickBooks Self-Employed, I'm not VAT Registered.

I'm going through my accounts and noticed that Etsy charges me VAT and QB Self Employed imports the transactions and automatically categorizes them as below.

Date	Transaction	Amount	Type	Category
01/08/2024	VAT: VAT sellers service fee	-£0.16	Business	Other business expenses

Do I leave it in this category, or change it to "VAT Paid" even though I haven't paid the VAT myself? Or maybe another category such as "Other financial charges"?

VAT Paid
- VAT payments you make.
Other financial charges
- Alternative or miscellaneous finance charges.
Other business expenses
- Miscellaneous business expenses like payments for professional journals or other running costs.

Also, I believe "Sales tax: Sales tax fee", "Transaction: Payment processing fee", "Transaction: Transaction fee", and "Other fees: Fee" would be categorized as Other financial chargers or maybe Bank Charges?

I'm a little confused about it, any help would be appreciated, please.

paul72 · ‎August 02, 2024

Hi @Kael

If you aren't VAT Registered, you still pay VAT on transactions but you can't reclaim it (as with any private consumer). It's therefore just another cost (Expense) to add to your outgoings.

If you want to track how much VAT you're paying you can separate it out (in any way you prefer) but the simplest way is just to enter all your costs including VAT.

So, a widget that costs £10.00 plus VAT - enter as costing £12.00.

No need to worry about the VAT as it's not relevant to you.

Hope this helps.

View solution in original post

paul72 · ‎August 02, 2024

Hi @Kael

If you aren't VAT Registered, you still pay VAT on transactions but you can't reclaim it (as with any private consumer). It's therefore just another cost (Expense) to add to your outgoings.

If you want to track how much VAT you're paying you can separate it out (in any way you prefer) but the simplest way is just to enter all your costs including VAT.

So, a widget that costs £10.00 plus VAT - enter as costing £12.00.

No need to worry about the VAT as it's not relevant to you.

Hope this helps.

Kael · ‎August 02, 2024

HI @paul72,

Thanks for the quick reply, I kind of assumed they would all be categorized as general expenses but thanks for the confirmation!

Would you recommend "Other financial charges" or "Other business expenses"? The description of the former is a little vague.

It looks like I have a lot to re-categorize to do as QuickBooks has already used the "VAT Paid" or "Professional Fee" category for alot of the transactions.

Thanks again!

paul72 · ‎August 02, 2024

Hi @Kael

I'd enter it in the same Category as the Seller Fee.

As above, since you aren't VAT Registered the VAT is just an Expense - so the actual cost of the Seller Fee to you is £0.96 (the £0.80 plus VAT of £0.16). Whether Etsy/QBO enter that as a single transaction of £0.96 or two (£0.80 plus £0.16) it has the same effect.

Don't get too hung up about categorising everything perfectly. As long as you're consistent - putting similar expenses in the same categories.

The Categories/Accounts are there (mostly) for your benefit - so you can track where your money is going. From a Tax/Accounting point of view an expense is an expense & they all get added together in the end (with certain caveats of course - but that's next level stuff!).

Topics

Training

Community

Resources

Categorizing Etsy VAT transaction when not VAT registered?