Accountants for e-commerce startups

E-commerce: the margin is in the detail nobody reconciles.

Marketplace fees, stock, returns and VAT across borders — four things that quietly decide whether a growing shop is profitable or just busy.

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The short answer

We act for UK e-commerce and direct-to-consumer startups: reconciling marketplace and payment-processor payouts to gross sales, treating stock properly so gross margin is real, handling returns and chargebacks, and getting VAT right once you sell across a border.

An online shop can grow quickly and lose money quietly, and the reason is nearly always the same: the numbers in the dashboard are not the numbers in the accounts. Marketplaces and payment processors pay you net — fees, refunds, chargebacks and advertising already deducted — so the figure that lands in the bank is not your revenue and never was.

Book the payout as sales and you have understated turnover, understated costs, and produced a gross margin that is fiction. It also means you can cross the VAT registration threshold without noticing, because the number you were watching was already net of everything.

Where the money actually goes

The four things that decide whether you are actually profitable

Gross sales, not the payout

Every marketplace settlement has to be broken back out into sales, fees, refunds, advertising and tax. Only then does turnover mean anything — including for the VAT threshold you might already have crossed.

Stock is not an expense

Inventory is an asset until it sells. Expensing purchases makes a good month look terrible and a slow month look excellent, and makes gross margin meaningless. It also misstates what the business is worth.

Returns and chargebacks

In some categories returns run high enough to change the entire economics. They need to be visible as their own line rather than buried in the settlement noise.

VAT once you cross a border

Selling to consumers in other countries, holding stock abroad, or using a fulfilment network can create obligations elsewhere. It is far cheaper to plan for than to unwind.

R&D relief in this sector

Be honest about whether there is a claim here

Most e-commerce businesses do not have an R&D claim, and we will tell you so rather than build one. Choosing a platform, configuring a theme, running paid acquisition and integrating tools that worked as documented are all ordinary trading activities, however much work they took.

Where a genuine claim does exist in this sector, it is usually a company that has built something because the off-the-shelf answer demonstrably did not work — a fulfilment or routing system solving a problem the available software could not, a pricing or forecasting engine with no published solution, or hardware and process development on the product itself. That is a real advance in the field, and it is claimable.

The distinction matters more here than almost anywhere, because e-commerce has been a favourite hunting ground for claim factories, and HMRC now checks a large share of claims with most checks ending in an adjustment.

How we handle R&D claims SEIS and EIS

A worked example

The payout is not the revenue

A DTC brand sees £50,000 land in the bank from its marketplace for the month and books it as sales. The settlement statement behind it actually says:

Gross sales £68,000
Marketplace and referral fees −£10,200
Advertising billed through the platform −£4,800
Refunds and chargebacks −£3,000
Net payout £50,000

Two things follow. Turnover is understated by £18,000 in a single month, so a business tracking the payout can sail past the £90,000 VAT registration threshold months before it notices — and HMRC will backdate the liability to the day it was crossed, on sales where no VAT was ever charged. And with fees and advertising invisible, gross margin is not a number anybody can act on: you cannot tell whether the last price rise worked, because the costs that eat it never appear.

Illustrative figures, chosen to show how the arithmetic behaves. Your numbers will differ, which is exactly why the calculation gets done before anything is filed.

What we do for you

The job, end to end

Marketplace and processor settlements broken back out into gross sales, fees, refunds and advertising
Stock accounted for properly so gross margin is a real number
The VAT threshold watched against gross sales rather than the money that landed
Cross-border VAT planned before you hold stock or sell overseas rather than afterwards
An honest answer on whether you have an R&D claim, and a proper one built if you do
Cashflow modelled around stock purchases, which is what actually kills growing shops

Questions

Straight answers

Why can I not just use the money Amazon or Shopify pays me?

Because it is net of fees, refunds, chargebacks and often advertising. Booking it as revenue understates both your turnover and your costs, makes gross margin meaningless, and can hide the fact that you have crossed the £90,000 VAT registration threshold — which is measured on gross sales, not on what reached your bank.

How should stock be treated?

As an asset until it sells, at which point it becomes cost of sales. Expensing stock on purchase makes profit swing wildly with buying decisions rather than trading, and it understates what the business is worth. It also makes it impossible to see whether your margins are actually improving.

Do we need to register for VAT in other countries?

Possibly, if you sell to consumers abroad, hold stock in another country, or use a fulfilment network that moves your goods across a border. The thresholds and rules differ by country and the position changes the moment stock moves. It is much cheaper to plan than to correct.

Can an e-commerce business claim R&D relief?

Sometimes, but far less often than it is sold. Configuring a platform, designing a store and running acquisition do not qualify. Building something because the available software demonstrably could not do the job — a routing or fulfilment system, a pricing engine with no published solution, or genuine product development — can. We will tell you honestly which side you are on.