Further to this thread, we have had a VAT inspection (which went fine, thank you : ) and the main area they were looking at was our EU imports. But they did state we were showing our paypal fees incorrectly - it was not an issue because there was no VAT element involved but whereas we had been treating them the same way as bank charges, we were told we should be using a different code - the following paragraph is taken from their post-visit letter Reverse charges. These are payable at 20% on supplies of taxable services bought in from outside the UK. Like acquisitions, the equivalent input tax is deductible subject to the usual rules, but the output tax and input tax amounts are posted to boxes 1,3 and 4 only. Charges such as those from Amazon would have to be treated in this way – but not from Paypal as it is an exempt financial service. Hope this helps!
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