The changes outlined below are relevant to businesses that are selling on Amazon to customers in the UK where the goods are stored outside the UK or where the goods are stored within the UK but the seller is based outside the UK.
On the first of January 2021, several changes were made to UK VAT law in response to the United Kingdom leaving the European Union.
For Amazon, the new legislation has impacted how VAT is collected on sales to customers within the UK. However, these changes to VAT does not mean that Amazon will be responsible for collecting all UK VAT.
If you are a business trading within the UK, your VAT situation will remain the same as before 1 January 2021 and you do not have to worry about taking any action. However, if you’re business trades outside of the UK, whether that’s drop shipping or sending goods directly to consumers from suppliers that are based outside of the UK, you will need to familiarise yourself with the Amazon VAT changes so that you are not caught out.
Here’s our guide to everything you need to know about Amazon UK VAT changes and how they will affect your Amazon store.
What Amazon Sellers Should Know About the New Amazon UK VAT Rules In 2021
The UK Government has created new UK VAT rules in order to ensure that all goods from outside the UK are treated in exactly the same way, meaning businesses operating within the UK won’t have to worry about being disadvantaged by competition from VAT free imports. At the same time, the new rules aim to improve VAT collection on imported goods.
All Amazon sellers should be aware that Amazon will now be responsible for collecting UK VAT on the following sales, when delivered to customers in the UK:
- Goods that are delivered from inventory stored in the UK where the seller is based outside the UK.
- Goods delivered from inventory stored outside the UK, which have a parcel value of up to £135.
In both of these circumstances, Amazon will be responsible for calculating and collecting UK VAT at the checkout. The VAT will then be passed on to the relevant tax authorities. You should be aware that you will not receive the UK VAT amount in your disbursements and, therefore, won’t need to remit these amounts to HMRC your VAT returns.
B2C UK Business with UK product
For B2C UK transactions, Amazon will collect VAT for all goods up to the value of £135, where the good are shipped directly from outside of the UK to UK consumers. If you are a non-UK seller shipping goods from outside the UK to UK consumers, this will apply to you. On the other hand, if you are a UK seller shipping goods from Amazon UK FBA, these changes won’t apply.
Amazon VAT rules have not changed for B2B sales, and Amazon will not be responsible for collecting VAT. This means that you must continue to account for the VAT as you did prior to the changes coming into play.
But how will you know if it is a B2B sale? It’s easy to establish whether or not a sale is B2B by checking if the customer has a valid UK VAT number. All VAT-registered accounts are categorised as B2B.
UK to EU Sales
Since the new rules came into play in January 1st, Amazon no longer includes the UK in its PAN EU fulfilment network.
This means that the platform is no longer able to facilitate sales to the EU from the UK there you will have no VAT implications. Of course, this has had a devastating impact on many UK businesses, and it is hoped that, in the future, this can be changed.
How to make sure your Amazon store is ready for these VAT changes
It’s important that all Amazon sellers ensure that their Amazon store is ready for these VAT changes.
You can do this by:
• Checking that your Seller Central account details are up to date – this is extremely important and should be done on a regular basis
• Taking the time to really understand all the shipping rules
• Checking that your pricing settings include any applicable VAT
• Checking the changes in your VAT invoicing and reporting details.
• Ensuring that you have appropriate accounting systems in place to correctly deal with the VAT treatment of your Amazon payouts.
Get expert Ecommerce VAT advice
If you’re struggling to get to grips with the new Amazon VAT rules, there’s plenty of help and support available.
Moreover, if you require further expert advice from an Amazon Accountant, don’t hesitate to contact us.