I am nowhere near vat threshold but I have to pay vat on everything item I sell.
Is there any alternative to vat exemption or what is the best course of action that previously non vat registered sellers are taking?
Non-VAT registered sellers previously got an exemption on VAT (fees) as Amazon was based in Luxembourg. However, starting from 1st August, they now have a tax liability in the UK, eliminating this loophole. Basically, you now pay VAT on fees.
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Given the recent VAT changes by Amazon, it might be beneficial to register for VAT. This allows you to reclaim VAT on your purchases and expenses. While it means you’ll pay VAT on sales, you can offset this by reclaiming VAT on eligible costs. If you’re not near the VAT threshold, you should evaluate whether the benefits of registration outweigh the administrative effort.
As you mentioned you are nowhere near to VAT threshold, then you shouldn’t register for VAT. I was confused for the same and have done all the calculations and found that there’s still better margins for non-VAT registered (UK Established) sellers compared to VAT registered sellers. In 80% cases, your output VAT (20% on selling price) is greater than your input VAT (20% to suppliers on product cost + 20% on amazon fee). It means you are still saving few extra pennies being non-VAT registered.
Raise your prices
Thanks all. Would it be better to go vat registered then so I can claim back vat