Accountants for e-commerce and direct-to-consumer brands.

Marketplace fees, stock, returns and VAT on cross-border sales decide whether a growing e-commerce brand makes a profit.

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We act for UK e-commerce and direct-to-consumer startups. We reconcile marketplace and payment-processor payouts to gross sales, account for stock so that gross margin is accurate, record returns and chargebacks, and account for VAT correctly once you sell across a border.

An e-commerce business can grow quickly and still lose money when the figures in its sales dashboard differ from the figures in its accounts. Marketplaces and payment processors pay you net, with fees, refunds, chargebacks and advertising already deducted, so the amount that reaches the bank is less than your revenue.

If you record the payout as sales, you understate both turnover and costs, and the gross margin is wrong. You can also pass the VAT registration threshold without noticing, because the figure you were watching had the deductions taken off.

A worked example of a marketplace payout

A direct-to-consumer brand receives £50,000 from its marketplace for the month and records it as sales. The settlement statement behind the payment shows:

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

Turnover is understated by £18,000 in a single month, so a business tracking the payout can pass the £90,000 VAT registration threshold months before it notices. It will then owe VAT from the date it should have been registered, on sales where no VAT was charged. With fees and advertising missing from the books, the gross margin figure is also wrong, so you cannot tell whether a price rise has improved it.

Illustrative figures. We run the calculation on your own numbers before anything is filed.

Run your own numbers

What decides an e-commerce brand's profit

Gross sales: Every marketplace settlement has to be split back into sales, fees, refunds, advertising and tax. Turnover, including turnover for the VAT registration threshold, is worked out from the gross sales.
Stock: Stock is an asset until it sells. Treating purchases as an immediate cost makes a month with heavy buying look bad and a month with little buying look good, distorts gross margin and misstates what the business is worth.
Returns and chargebacks: In some product categories returns are high enough to change whether the business makes a profit. Record them as a separate line so you can see them.
VAT once you cross a border: Selling to consumers in other countries, holding stock abroad or using a fulfilment network can create VAT obligations in other countries. Plan for them before you start, because correcting the position afterwards costs more.

R&D relief for e-commerce companies

Most e-commerce businesses do not have an R&D claim. Choosing a platform, configuring a theme, running paid advertising and connecting tools that worked as documented are ordinary trading activities, however much work they took.

Where a claim does exist in this sector, it is usually because the company built something after the available software failed to do the job. Examples are a fulfilment or routing system solving a problem that existing software could not, a pricing or forecasting engine with no published solution, or development of the product itself and the process for making it. Work of that kind can be an advance in the field, and it can qualify.

HMRC now checks a large share of R&D claims, and most of its checks end in an adjustment, so identify the qualifying work carefully before a claim is made.

How we handle R&D claims SEIS and EIS

What we do for e-commerce brands

Marketplace and payment-processor settlements split into gross sales, fees, refunds and advertising
Stock accounted for as an asset, so gross margin is accurate
Gross sales tracked against the VAT registration threshold
Cross-border VAT planned before you hold stock or sell overseas
An assessment of whether you have an R&D claim, and the claim prepared if you do
Cashflow modelled around stock purchases

Common questions

Why can we not record the money Amazon or Shopify pays us as sales?

The payout has fees, refunds, chargebacks and often advertising already deducted. Recording it as revenue understates both your turnover and your costs and distorts gross margin. The £90,000 VAT registration threshold is measured on gross sales, so recording the payout can also hide the fact that you have passed it.

How should stock be treated?

As an asset until it sells, when it becomes a cost of sale. Treating stock as a cost when you buy it makes profit move with your buying decisions, understates what the business is worth and hides whether your margins are improving.

Do we need to register for VAT in other countries?

You may need to 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 as soon as stock moves. Plan it before you start, because correcting it later costs more.

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

Sometimes. Configuring a platform, designing a store and running advertising do not qualify. Building something because the available software could not do the job, such as a routing or fulfilment system or a pricing engine with no published solution, can qualify, and so can development of the product itself.