What Does an Ecommerce Business Need from an Accountant in 2025/26?

Why Ecommerce Accounting Is Different from a Normal Business

If you run an online shop, a marketplace business, or a direct-to-consumer brand, your accounting needs are not the same as a high street shop or a consultancy. Stock moves differently. Sales happen across borders. VAT rules change depending on where your customer is and which platform you use.

A general accountant might handle your annual accounts and corporation tax return. But an accountant for ecommerce business will also manage your multi-jurisdiction VAT, your stock valuation, your platform fee deductions, and your Making Tax Digital (MTD) compliance. Those are not optional extras. They are core to staying compliant and keeping your margins intact.

We are ICAEW-qualified accountants based in the UK, working with ecommerce businesses from a single seller on Etsy through to multi-channel operations turning over £2m plus. Here is what you should expect from a specialist ecommerce accountant.

VAT Across Borders: The Multi-Jurisdiction Problem

VAT is the single biggest compliance headache for ecommerce businesses. The rules change depending on where your customer is, what you sell, and whether you use a marketplace like Amazon, eBay, or Etsy.

If you sell to UK customers and your turnover exceeds £90,000 in a rolling 12-month period, you must register for VAT. That is straightforward. But the moment you sell to customers in Northern Ireland, the EU, or further afield, you enter a different set of rules.

Northern Ireland follows EU VAT rules under the Northern Ireland Protocol. If you store goods there, or sell to consumers there, you may need to register for the UK's VAT scheme or the EU's Import One Stop Shop (IOSS) depending on the value and origin of the goods. This is not something a general accountant will typically handle.

For EU sales, the One Stop Shop (OSS) scheme lets you declare and pay VAT on distance sales to EU consumers in a single return. You register in one member state and report quarterly. Miss this, and you risk VAT registration requirements in multiple EU countries, each with its own language, filing deadlines, and penalties.

If you sell through Amazon or eBay, those platforms may collect and remit VAT on your behalf under marketplace rules. But you still need to check your own obligations. The platform does not handle your corporation tax, your stock accounting, or your UK VAT returns. It just handles the VAT on the specific sales it facilitates.

An accountant for ecommerce business will map out where you sell, what VAT schemes apply, and whether you should use OSS, IOSS, or a local registration. They will also set up your accounting software (Xero or FreeAgent are the most common for ecommerce clients) to handle the multi-currency and multi-rate VAT automatically.

Stock Accounting: Not Just What You Bought, But When

Ecommerce businesses carry stock. That means you cannot just record purchases as expenses when you pay for them. You must value stock at the lower of cost or net realisable value, and include it on your balance sheet. This affects both your corporation tax and your profit reporting.

If you buy 1,000 units of a product for £10 each and sell 600, your cost of goods sold is £6,000. The remaining £4,000 of stock sits on your balance sheet as an asset. That sounds simple, but it gets complex when you factor in shipping costs, import duties, packaging, and storage fees. Those are all part of the cost of stock.

If you use a third-party fulfilment centre like Amazon FBA, you also need to track where your stock is held. Stock in a UK warehouse is straightforward. Stock in a German or French warehouse creates a permanent establishment risk for corporation tax in that country. HMRC and local tax authorities can argue you have a taxable presence there.

An accountant for ecommerce business will set up your stock tracking in your accounting software, run periodic stock counts, and ensure your valuation is correct. They will also flag the permanent establishment risk if you hold stock overseas and advise on whether you need to register for corporation tax in that jurisdiction.

Marketplace Fees, Advertising Costs, and Returns

Ecommerce businesses have costs that a traditional retailer does not. Platform fees, advertising spend on Amazon, Google, and social media, chargebacks, and returns all need proper accounting treatment.

Amazon referral fees, monthly subscription fees, and FBA fulfilment fees are all deductible against your trading profits. But they appear as gross deductions on your Amazon settlement reports, not as itemised invoices. Your accountant needs to reconcile those reports against your bank statements and your sales data. A mismatch of even a few hundred pounds across thousands of transactions can throw your VAT return off.

Advertising spend is another area. If you run Amazon PPC or Google Ads, those costs are deductible. But the timing matters. If you prepay for a campaign, the cost is spread over the campaign period, not all in the month you paid. Your accountant should handle that accrual correctly.

Returns are a particular pain point. When a customer returns a product, you must reverse the sale, adjust your VAT, and add the stock back into inventory at the right value. If the stock is damaged, you write it down. If it is unsaleable, you write it off. Each of those steps has a VAT and corporation tax implication.

A good accountant for ecommerce business will have a process for handling returns, chargebacks, and refunds in your bookkeeping software. They will not just leave them as negative entries in your sales feed.

Making Tax Digital for Income Tax (MTD for ITSA)

From April 2026, self-employed ecommerce sellers and sole traders with qualifying income over £50,000 must use MTD-compatible software to keep digital records and submit quarterly updates to HMRC. From April 2027, the threshold drops to £30,000. From April 2028, it drops to £20,000.

If you trade as a limited company, MTD for ITSA does not apply to you directly. But your company's corporation tax is also moving toward digital reporting. The roadmap from HMRC points to full MTD for corporation tax by the end of the decade. For now, you file your CT600 corporation tax return annually, but HMRC expects digital records.

If you are a sole trader running an ecommerce business, MTD for ITSA means you cannot just hand your receipts to an accountant at year-end and let them file your SA100 self assessment return. You need to update HMRC quarterly using compatible software like Xero, FreeAgent, or QuickBooks. Your accountant should set this up for you and review each quarter before submission.

An accountant for ecommerce business who is MTD-ready will have already moved their clients onto digital bookkeeping. If your accountant is still asking for paper receipts or PDF bank statements, they are not ready for 2026.

Corporation Tax and Profit Extraction for Ecommerce Ltds

If you trade through a limited company, your corporation tax is calculated on your taxable profits after deducting all allowable expenses, including stock, platform fees, advertising, and salaries. The current rates (2025/26) are 19% on profits up to £50,000, 25% on profits above £250,000, and marginal relief between £50,000 and £250,000.

Most ecommerce businesses fall into the 19% or marginal relief bracket. But if you hold stock overseas or have associated companies (another limited company you control), you must aggregate profits across all companies for the marginal relief calculation. That is a common trap for ecommerce entrepreneurs who set up multiple Ltds for different brands or marketplaces.

Profit extraction is another area where ecommerce businesses differ. Many directors pay themselves a salary up to the personal allowance (£12,570) and take the rest as dividends. That works for most ecommerce businesses, but only if you have sufficient retained profits. If you are reinvesting heavily in stock and advertising, your distributable reserves may be lower than your cash flow suggests.

An accountant for ecommerce business will run a director pay strategy review each year. They will model salary vs dividends, check your retained earnings, and ensure you are not accidentally creating a director's loan account overdrawn beyond £10,000, which triggers a benefit in kind charge and S455 tax at 33.75%.

R&D Tax Credits for Ecommerce Businesses

Many ecommerce businesses assume R&D tax credits are only for tech companies or manufacturers. That is not correct. If you have developed new software, automated a process, or solved a technical problem in your supply chain, you may qualify.

Examples we have seen in ecommerce clients include: building a custom inventory management system, developing a machine learning model for demand forecasting, creating a proprietary payment integration, or automating warehouse picking and packing. These are not routine. They involve overcoming technical uncertainty.

From April 2024, the merged R&D scheme applies. If you are a loss-making company spending more than 30% of your total expenditure on R&D, you may qualify for the enhanced R&D Intensive Scheme (ERIS). The rates and reliefs are different from the old SME scheme, so you need an accountant who understands the current rules.

An accountant for ecommerce business who handles R&D claims will review your development activity, identify qualifying projects, and prepare the R&D AIF (Additional Information Form) that HMRC now requires. They will also manage the risk of HMRC enquiries, which have increased significantly since 2023.

Choosing the Right Accountant for Your Ecommerce Business

Not every accountant can handle ecommerce. You need someone who understands the specific software, the VAT rules across jurisdictions, the stock accounting, and the platform reporting. Here is what to ask when you interview one:

• Do you work with Xero or FreeAgent for ecommerce clients? (If they say Sage 50 or manual spreadsheets, walk away.)
• Can you handle OSS and IOSS VAT registrations for EU sales?
• How do you reconcile Amazon settlement reports against bank statements?
• Do you set up MTD for ITSA for sole trader ecommerce clients?
• Have you handled R&D claims for ecommerce businesses?

We are ICAEW-qualified accountants based in the UK, working with ecommerce businesses across every sector. If you want to discuss your specific situation, get in touch. We can review your current set-up and tell you what is missing.

If you are still deciding whether to trade as a sole trader or limited company, our incorporation guide covers the tax and legal differences. For a deeper look at VAT rules for online sellers, the glossary explains terms like OSS, IOSS, and distance selling in plain English.