Bookkeeping for marketplace and payment processor payouts

Q: What does a worked example look like?

Illustration only. A VAT registered seller's two week marketplace statement shows sales of £1,200 including VAT of £200, refunds of £60 including VAT of £10, selling fees of £150 plus VAT of £30, fulfilment fees of £90 plus VAT of £18 and advertising of £40 plus VAT of £8. The payout is £804. The example assumes the platform charges UK VAT on its fees and issues VAT invoices for them. EntryDebitCredit Sales collectedClearing £1,200Sales £1,000; output VAT £200 RefundsSales returns £50; output VAT £10Clearing £60 Platform feesSelling fees £150; fulfilment £90; advertising £40; input VAT £56Clearing £336 Payout receivedBank £804Clearing £804 The clearing account returns to zero. Net sales are £950 and selling costs £280, compared with a payout of £804. Booking £804 as sales would understate turnover by £146, misstate output VAT and lose £56 of input tax. VAT on platform fees can be reclaimed only with valid evidence: VAT Notice 700 treats a VAT invoice as the evidence for input tax. If a fee is supplied by an overseas business, HMRC's guidance notes that a reverse charge applies to most business to business services supplied in the UK by overseas suppliers, so check each platform's fee invoices rather than assuming.

Q: How should refunds, chargebacks, reserves and currency be recorded?

Refunds reduce sales. Under FRS 102 paragraph 23.53, where customers have a right of return, revenue is recognised only for goods not expected to be returned, with a refund liability for the rest, so a business with high return rates should estimate returns at the year end. Chargebacks reverse the sale like a refund; any chargeback fee is a separate expense. Reserves and holds stay in the clearing account as an asset until released. Currency. If the platform pays in another currency or converts at its own rate, the conversion charge is a cost, not a sales adjustment. See foreign currency bank accounts. Stock. Goods you still own count in your year end stock even if they sit in a marketplace's warehouse, so use the platform's inventory report at the stocktake.

A payout from Amazon, eBay, Stripe or PayPal is a net figure: the platform has collected your customers’ money, taken its fees, refunds and sometimes a reserve, and paid you what is left. Your books should show the full sales as income and the fees as expenses, not the payout as sales. The cleanest method is a clearing account for each platform, posted from the platform’s settlement report and reconciled to zero after each payout.

Tax investigation insurance from £108.75 a year (£9.06 a month).Pays up to £100,000 of your accountant's fees if HMRC opens an enquiry. No excess. Buy online in a few minutes.

See my price in 2 questions How the cover works Accountant? Offer cover to your clients or call 01795 841 310

Why can’t I just record the payout as my sales?

Because it understates both income and costs, and the understatement feeds into several legal tests.

Company accounts. Schedule 1 to the Small Companies and Groups (Accounts and Directors’ Report) Regulations 2008 says amounts representing income may not be set off against amounts representing expenditure (paragraph 8), and that presentation must reflect the substance of the transaction (paragraph 9). Netting fees against sales breaches both.
Revenue recognition. Under the revised FRS 102 Section 23, mandatory for accounting periods beginning on or after 1 January 2026, an entity that controls the goods before they pass to the customer is a principal and recognises revenue at the gross amount of consideration (paragraphs 23.37 to 23.39). Indicators include being primarily responsible for fulfilment, carrying inventory risk and setting the price. A seller who owns the stock and sets the price on a marketplace usually meets them; the platform’s commission is then a cost of selling.
Thresholds. The trading allowance is tested on gross trading income, meaning the total before any expenses, whether you use the cash basis or traditional accounting. For VAT, taxable turnover is the total value of everything you sell that is not exempt or outside the scope of VAT, and registration is required once it exceeds £90,000 in a rolling 12 months. Using payouts can hide a breach of the VAT registration threshold.
Company size. Turnover for the Companies Act size tests is defined in section 474 as amounts derived from the provision of goods and services, after trade discounts and VAT, so platform fees are not deducted.

How does a platform clearing account work?

Treat each platform as a bank account you do not control. Set up a balance sheet account for it in your chart of accounts, then for each settlement period:

Download the settlement or payout report, not just the bank line.
Debit the clearing account with gross sales collected, crediting sales and, if VAT registered, output VAT.
Credit the clearing account with refunds, crediting nothing to expenses: refunds reduce sales.
Credit the clearing account with each fee type, debiting the matching expense account and any reclaimable input VAT.
When the payout reaches the bank, debit bank and credit the clearing account.
Check the clearing balance agrees with the balance the platform shows as still held for you.

Any balance left in the clearing account is money the platform owes you. At the year end it is an asset on the balance sheet, including any reserve or rolling hold the platform has kept back.

Run an accountancy or bookkeeping practice? Solar Protect runs fee protection schemes for practices, so the cost of dealing with an HMRC enquiry into a client is covered rather than written off.

See how our accountant schemes work or call 01795 841 310.

What does a worked example look like?

Illustration only. A VAT registered seller’s two week marketplace statement shows sales of £1,200 including VAT of £200, refunds of £60 including VAT of £10, selling fees of £150 plus VAT of £30, fulfilment fees of £90 plus VAT of £18 and advertising of £40 plus VAT of £8. The payout is £804. The example assumes the platform charges UK VAT on its fees and issues VAT invoices for them.

Entry	Debit	Credit
Sales collected	Clearing £1,200	Sales £1,000; output VAT £200
Refunds	Sales returns £50; output VAT £10	Clearing £60
Platform fees	Selling fees £150; fulfilment £90; advertising £40; input VAT £56	Clearing £336
Payout received	Bank £804	Clearing £804

The clearing account returns to zero. Net sales are £950 and selling costs £280, compared with a payout of £804. Booking £804 as sales would understate turnover by £146, misstate output VAT and lose £56 of input tax. VAT on platform fees can be reclaimed only with valid evidence: VAT Notice 700 treats a VAT invoice as the evidence for input tax. If a fee is supplied by an overseas business, HMRC’s guidance notes that a reverse charge applies to most business to business services supplied in the UK by overseas suppliers, so check each platform’s fee invoices rather than assuming.

How do Stripe and PayPal differ from Amazon and eBay?

With a payment processor, you make the sale on your own website and the processor only collects the money and deducts a processing fee. The bookkeeping is the same clearing method, with one fee line. For VAT, GOV.UK guidance says a business that only processes payments is not an online marketplace; a marketplace is involved in setting terms of sale, processing payments and ordering or delivery.

That distinction affects VAT. Online marketplaces are liable for the VAT on sales of goods in the UK by sellers not established in the UK, and on consignments of £135 or less imported from outside the UK. A seller established in the UK is outside those rules and must consider VAT registration in the normal way.

How should refunds, chargebacks, reserves and currency be recorded?

Refunds reduce sales. Under FRS 102 paragraph 23.53, where customers have a right of return, revenue is recognised only for goods not expected to be returned, with a refund liability for the rest, so a business with high return rates should estimate returns at the year end.
Chargebacks reverse the sale like a refund; any chargeback fee is a separate expense.
Reserves and holds stay in the clearing account as an asset until released.
Currency. If the platform pays in another currency or converts at its own rate, the conversion charge is a cost, not a sales adjustment. See foreign currency bank accounts.
Stock. Goods you still own count in your year end stock even if they sit in a marketplace’s warehouse, so use the platform’s inventory report at the stocktake.

How does this tie in with what platforms report to HMRC?

Since 1 January 2024 UK digital platforms have had to collect seller details and report sellers’ income to HMRC each year by the following 31 January, so 2024 data was due by 31 January 2025. Sellers of goods with fewer than 30 sales and less than 2,000 euros (about £1,700) in a calendar year are not reported. HMRC’s manual says platforms report the consideration paid or credited after deducting fees, commissions and taxes withheld, with those fees and taxes reported separately. To reconcile your books to the platform’s report, add the fees back and adjust for the calendar year, since your accounts or the tax year (6 April to 5 April) will usually cover a different period. More on this is in digital platform reporting to HMRC.

What records should I keep?

Keep the settlement reports, order level transaction reports and the platform’s fee invoices, not just bank statements. A company must keep accounting records sufficient to show and explain its transactions (section 386 of the Companies Act 2006), and a business dealing in goods must also keep stocktaking records and year end stock statements. Private companies must keep the records for three years from when they are made (section 388), and VAT Notice 700/21 says VAT records should generally be kept for at least six years. Platform dashboards can change or close, so download reports regularly.

What mistakes come up most often?

Posting the payout straight to sales from the bank feed.
Treating refunds as an expense, which overstates turnover.
Reclaiming VAT on fees without a VAT invoice, or missing a reverse charge on overseas fees.
Ignoring the platform balance and reserves at the year end.
Comparing the platform’s annual report to HMRC with your sales without adding back fees.
Using several platforms but one combined clearing account, so differences cannot be traced. The choice between cash and accruals methods is covered in cash basis vs accruals accounting.

Solar Protect provides tax investigation insurance for businesses and fee protection schemes for accountancy practices. Read how our cover works or get a quote.

Related Accountapedia entries

Sources

Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 8 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.