Is your Amazon business VAT-registered? Or perhaps you’re on the cusp of needing to register. If so, then you must be aware of Amazon’s upcoming VAT changes on the treatment of fees and how they might affect your business.
As of 1 August 2024, all Amazon fees in the UK will be charged at 20% VAT. This change will impact all Amazon sellers, whether they are VAT-registered or not. VAT-registered sellers will be able to reclaim this VAT, while others may not and, therefore, face higher costs.
At Archimedia Accounts, we’re here to shed some light on the important VAT changes that UK Amazon sellers need to know about. With over 30 years of experience in tax and accounting, we’ve seen it all, and we understand the challenges that come with new changes. We’re committed to helping you handle VAT compliance with ease.
Our experts explore the latest VAT changes and how they might impact your business. We also give careful guidance on how to prepare. So, if you want to stay in the know, then keep on reading.
Get your business in the best position today with Archimedia’s VAT accounting services, so contact us to learn more.
What are the Amazon UK VAT changes?
In a nutshell, Amazon will soon start billing UK sellers’ fees through a UK company instead of Amazon Services Europe S.à r.l. (a company based in Luxembourg). As a result, UK sellers will be liable to pay VAT on their fees. So, if you’re not a VAT-registered business, you’ll immediately miss out because you won’t be able to reclaim VAT.
Product ads fees (for UK-based ads) were pretty much the only thing Amazon charged VAT on. However, going forward, it will be charged on almost everything.
We believe Amazon will bring this change into effect for:
- Merchant Seller Fees
- Subscription Fees
- FBA Fees
Previously, VAT treatment was handled through the reverse charge mechanism, which meant that UK businesses and sellers would charge VAT on overseas sales and could reclaim it on their VAT return. But this will no longer be the case. Non-VAT-registered businesses will now take the hit.
When will these changes come into effect?
Amazon announced that the most recent changes to UK VAT law will take effect on 1 August 2024.
Previous changes in 2021, as a result of Brexit, meant that Amazon is now responsible for collecting VAT for non-UK sellers. It also meant that the UK is no longer included in the PAN EU fulfilment network, meaning EU sales from the UK are no longer supported.
How will this affect Amazon sellers in the UK?
The upcoming changes to the way Amazon will collect VAT will affect UK Amazon sellers in different ways.
Firstly, if you’re already registered for VAT, you shouldn’t really notice the impact from a profit point of view. However, your cash flow may be affected. This is because you’ll pay VAT directly to Amazon and only get it back when you submit your VAT returns.
Then, there’s the impact on non-VAT-registered Amazon Sellers. If your business is not VAT registered, it can’t reclaim the VAT collected. Suddenly, your business will be hit overnight by an extra 20% on Amazon fees!
What should UK Amazon sellers do now?
If your Amazon business is already VAT registered, then the Amazon VAT changes won’t really affect you.
However, if your Amazon seller business isn’t VAT registered, your Amazon fees will soon increase by 20%. This is where voluntary VAT registration could be a wise move. Becoming VAT-registered will mean you can reclaim VAT, but you’ll also have to start charging customers and stick to your local VAT rules.
If most of your sales happen outside of the UK, then becoming VAT-registered shouldn’t impact your business too much. Since VAT isn’t charged on goods sold outside of the UK, you won’t have many changes in how you charge customers on the platform.
But if your sales are primarily UK-based, you will massively notice the impact of becoming VAT-registered (unless, of course, the products you sell are VAT-exempt). You’ll suddenly have to start charging VAT on all your UK sales, and this money isn’t your profit. It’ll go straight to HMRC.
Why not become VAT-registered and grow your business? At Archimedia, we believe that becoming VAT-registered can be a step in the right direction for your Amazon business. It will also provide opportunities for growth and financial stability.
Can you reclaim the VAT paid to Amazon?
With the new VAT rules in place, the only way you can reclaim any VAT paid on Amazon fees is if your business is VAT-registered. You can do this by filing a VAT return.
You can also find more information about your Amazon VAT obligations in your Amazon VAT Transactions Report.
Will Flat Rate Scheme VAT registered sellers be worse off?
The latest changes will impact businesses operating under the VAT Flat Rate Scheme. They’ll be in the same boat as non-VAT registered businesses.
Under the Flat Rate Scheme, you’ll pay HMRC a fixed percentage of your total sales (including VAT), but you can’t claim back VAT on your costs.
Looking for more UK VAT advice? Get in touch with us
If your Amazon business is approaching the VAT threshold, it’s a clear sign that you’re on the right path to growth. At Archimedia Accounts, we’re here to help you become VAT-registered and grow your business. We’ll guide you through every step of the VAT registration process and provide professional ongoing support.
We help E-Commerce businesses smash it! What you really need is:
- to understand your numbers so you can have massive growth with the right profit and without risk;
- find innovative ways to maximise your tax savings now and in the future;
- slowly invest extra profits to build an asset empire for your future financial security.
We’ll help you achieve this and so much more. Contact our friendly team today to discover how we can help your Amazon business make the recent VAT changes work to your advantage.
