VAT Information for Amazon Sellers in the UK: Essential Updates and Guidance for 2024

Are you an Amazon seller in the UK wondering how the recent VAT changes might affect your business?

If so, you're not alone. These changes, effective 1 August 2024, bring significant implications for fees, invoicing, and VAT compliance on the platform. Whether you're VAT-registered or not, this is information every seller needs to understand.

What Changed in August 2024?

Amazon updated its VAT policy for UK sellers, transitioning fee billing from Amazon Services Europe S.à r.l. (Luxembourg) to a UK entity. This means all Amazon fees—including subscription fees, FBA fees, and referral fees—are now subject to the 20% VAT rate in the UK.

Here’s a breakdown of the key changes:

• VAT on Fees: Previously, fees were processed under the reverse charge mechanism, allowing VAT-registered sellers to account for VAT without an upfront payment. Now, sellers are directly charged VAT on fees.

• Impacted Sellers:

  • VAT-registered sellers: Can reclaim VAT on fees via VAT returns but may experience cash flow challenges.

  • Non-VAT-registered sellers: Face increased costs, as they cannot reclaim the additional 20% VAT.

How This Impacts UK Amazon Sellers

For VAT-Registered Sellers

If you're VAT-registered, these changes won’t affect your profits significantly since you can reclaim the VAT. However, expect temporary cash flow issues, as you'll pay the VAT upfront to Amazon and reclaim it later through your VAT return.

For Non-VAT-Registered Sellers

Non-registered sellers will experience a direct 20% increase in Amazon fees. If you aren’t VAT-registered, this means higher costs without the ability to reclaim VAT—potentially reducing profitability overnight.

Impact on Bookkeeping

• All Amazon transactions now require adjustments in accounting systems.

• Update your VAT settings to ensure proper tracking of VAT on fees.

• Consider cloud-based accounting tools like QuickBooks Online for seamless VAT compliance.

Should You Register for VAT?

For businesses approaching the VAT threshold (£90,000 turnover per year), now might be the time to voluntarily register for VAT. Here’s why:

• Reclaim VAT: Registered sellers can reclaim VAT on Amazon fees and other eligible expenses.

• Expand Opportunities: Being VAT-registered builds credibility and positions your business for growth.

• Be Tax-Smart: If most of your sales are to non-UK customers, VAT registration may have minimal impact on pricing since VAT isn’t applied to overseas sales.

However, VAT registration also means:

• Charging VAT on UK sales.

• Meeting additional reporting and compliance obligations.

Steps to Navigate These Changes

If you’re a UK-based Amazon seller, here’s what to do next:

1. Review Your VAT Status:

   • Are you above the VAT threshold? If yes, you’re required to register.

   • Below the threshold? Consider the pros and cons of voluntary registration.

   
   

2. Update Bookkeeping Systems:

   • Adjust accounting software to reflect VAT charges on Amazon fees.

   • Track all VAT-eligible expenses to maximise reclaim opportunities.

     
     

3. Plan for Cash Flow:

   • Budget for the upfront payment of VAT on fees.

   • Ensure timely filing of VAT returns to avoid penalties.

     
     

4. Seek Professional Advice:

   • VAT compliance can be tricky. Engaging an experienced accountant can help ensure you're meeting requirements while optimising tax efficiency.

     
     

How Griffith Accountants Can Help

At Griffith Accountants, we specialise in supporting Amazon sellers and other e-commerce businesses with VAT registration, compliance, and tax-saving strategies. Here’s what we offer:

• VAT Registration and Returns: Simplify your VAT obligations with our expert assistance.

• Bookkeeping Services: Stay organised and compliant with precise records of your transactions.

• Cash Flow Management: Plan ahead to mitigate cash flow challenges arising from VAT payments.

• Rolling Forecasts and Growth Planning: Our unique forecasting services ensure your business stays on track for long-term success.

  
  

Contact us today to discuss how we can make VAT compliance easier for your Amazon business.

FAQs for Amazon Sellers on VAT Changes

1. How will VAT on Amazon fees affect my profit margins?

If you’re VAT-registered, there’s little impact as you can reclaim the VAT. For non-registered sellers, the 20% increase in fees may reduce your profitability.

2. Should I voluntarily register for VAT?

It depends on your sales profile. If most sales are outside the UK, VAT registration may have limited impact. For UK-based sales, you’ll need to charge VAT but can also reclaim VAT on expenses.

3. What happens if I stay non-VAT-registered?

You’ll pay 20% VAT on Amazon fees without the ability to reclaim it, increasing your overall costs.

4. How do I adjust my bookkeeping for these changes?

Switch from the reverse charge mechanism to recording VAT on fees directly. Tools like QuickBooks Online or Xero can help automate these adjustments.

5. Can I reclaim VAT on Amazon fees?

Yes, but only if your business is VAT-registered. Reclaimed amounts are submitted via your VAT return.

Ready to Tackle VAT Changes?

Understanding these VAT updates is crucial for maintaining profitability and compliance on the Amazon.co.uk marketplace. As trusted accountants, Griffith Accountants can guide you every step of the way.

Explore our dedicated VAT Services or contact us to see how we can help you thrive amid these changes. Let’s turn challenges into opportunities and keep your Amazon business growing strong!