I need some advice. I’m a small business owner and I’ve noticed that Amazon UK is charging VAT on their service fees. This is surprising because HMRC doesn’t charge VAT from small businesses like mine.
Can anyone help me understand:
Has anyone else faced this issue with Amazon UK?
How did you deal with it? Did you get any solution or explanation from Amazon?
What steps can I take to challenge this charge?
Should I contact HMRC about this, or is there a better way to handle it?
Would it help to get a local MP or business representative involved?
This extra cost is really hard for small businesses like mine. How can we survive in the UK market now?
I don’t think there is anything to be done about it as this change is happening. May be worth now going VAT reg for you, as your a very close to it. I agree its going to hit the margins, however the only thing that is in our control is to source products with higher margins to compensate for this. Good luck.
There is VAT charged on nearly every product or service. Sometimes you see it clearly on an invoice and sometimes you don’t. But it’s there at 20%.
If you are VAT registered, you can reclaim it in your quarterly VAT return. If you are not, you just need to incorporate it in your costings.
Amazon charges their fees from Luxemburg and there was a time that you could declare yourself as tax exempt and not pay it but this is changing very soon and they will invoice you from your local country (ie UK) so the only way to not pay it (or more correctly, reclaim it) is to register for VAT.
As a business owner, you need to be familiar with taxation.
If your sales are under the 90k threshold, open a case with Amazon and provide the VAT deduction report. After reviewing, Amazon will return your deductible amount.
I recently launched a company in the UK. If I do not store any inventory in the UK and I am not UK resident, do I need to be VAT registered? And also, is it the case that I pay tax from UK sales but not from overseas sales (when I am not UK resident)?
While I do understand much taxation law, I am by no means an expert so any advice I give really needs to be taken with a pinch of salt.
The short answer to this is “I don’t know for sure”.
The long answer is… If you are only selling on Amazon, then Amazon will determine that you are not established in the UK for VAT purposes and will retain the VAT before they pay you as Mark Facilitator Tax.
You could be VAT-registered and that may be beneficial. In that case, Amazon shouldn’t charge Market Facilitator Tax. But reading the forums, they seem to have a problem with some sellers and double tax. Not sure what to suggest there.
It gets very complicated when exporting to EU and less so, outside of the EU. I stopped when Brexit came in as it got too complicated. I have my thoughts but as I am not totally sure, I would rather not say anything in case I am mistaken.
I strongly suggest you obtain professional advice to be sure.
From my understanding, I will be a NETP. Amazon should be collecting and paying the VAT on my behalf, when I don’t store any inventory in FBA warehouses.
And as a company, I will only pay tax on UK sales. Sounds complex. I will hire an accountant.