US company eBay is changing the way it processes payments for UK businesses. Image by Steven Arnold via Wikimedia Commons.

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Currently UK sellers pay fees to a Luxembourg subsidiary but from August money will be processed through eBay’s UK business and will be subject to the 20% tax.

The company said the move reflected changes following its split from digital payment firm PayPal in 2015. 

Most private individuals who use eBay as a selling platform will not be affected and there will also be no extra costs for most business sellers that are already VAT registered. However, traders that have a business account with eBay but have not registered for VAT will be hit.

In a message to these customers last week, eBay said: “You’ll begin paying 20% UK VAT to eBay (UK) Limited on taxable fees and won’t be able to reclaim VAT paid unless you register for VAT with HMRC.”