Amazon seller VAT registration: Avoid cash flow crisis for your online business

/ Posted By - Bradleys Accountants / Categories - Advice for Small Businesses

The landscape for online sellers has shifted significantly, particularly with new UK tax regulations. UK law requires that Amazon verify that its sellers are actually based in the UK to avoid tax fraud. Even for overseas sellers, setting up a UK company and taking a UK VAT number is quite easy, and verification becomes necessary to prevent fraudulent activity of this sort.

Post-Brexit stricter checks on Amazon seller VAT registration

After Brexit, Amazon implemented stricter checks to ensure its UK sellers were indeed UK sellers. Amazon must also collect and remit the VAT owed on overseas orders. To that extent, UK businesses registered on its platform must provide proper tax documentation, including Amazon seller VAT registration details.

The trouble arises because Amazon has suspended payouts to hundreds of UK businesses while it goes through those tax documents.

Moreover, many sellers have reported that Amazon repeatedly asks them for the same documents, such as their Amazon VAT no and Amazon VAT tax information, and that Amazon does not properly respond to queries about when those sellers can expect their payments.

Some have even reported being asked to pay VAT on sales from as far back as 2021 unless they can prove that they’re a UK business. This is even though Amazon had originally assured sellers that the checks would only take a few days.

Some have also reported being asked to pay VAT even when they make less than £85,000 in turnover a year and are thus below the mandatory VAT registration threshold.

Implications for small businesses because of Amazon’s checks

The situation stems from the understandable motive of ensuring VAT is collected as due. However, this is a serious logistical problem on Amazon’s end and can have major consequences for small businesses that may not have cash flow sources to tide them over.

For many of the 85,000 small UK businesses registered on Amazon, platform sales are their only means of livelihood, and a holdup in payouts could disrupt their ability to pay suppliers and employees and even cause the business to go bankrupt.

Some have already reported borrowing money to cover their bills—including their regular tax and VAT payments. This could have been solved if Amazon had implemented proper processes to sort through documentation speedily and accurately.

The eCommerce giant’s perspective on Amazon seller VAT registration

Amazon’s spokespeople have presented their points of view. According to them, no feedback or concerns were raised when the company presented its UK VAT verification approach to HMRC.

That was why, when HMRC changed its standards for UK-registered sellers more recently, Amazon was compelled to take steps that created more work for its team and consequently led to hold ups with sellers.

While releasing the pending payments is of prime importance, there’s certainly a case for making laws clearer in the long term so that companies like Amazon do not have to react in this fashion.

Amazon has also recommended that HMRC perform more checks upfront on those registering for UK VAT numbers to simplify later checks for everyone, including HMRC VAT registration number check and HMRC VAT number validation processes.

So far, around 500 affected UK sellers have written to the UK small business commissioner, who has urged Amazon to investigate this matter and unfreeze the payments as soon as possible.

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    How accountants can help your small online retail business

    If you’re a UK-based small business that the Amazon seller VAT registration checks have impacted, you can get help from our expert accountants. Regardless of the problem, we can help you navigate the challenges posed by new regulatory requirements and tax compliance measures. Here are some specific ways Bradleys Accountants can assist:

    1. Dispute resolution

    Suppose your online retail business encounters issues with Amazon, such as suspended payouts or repeated document requests. In that case, we can communicate with the platform on your behalf, clarify your compliance status, and expedite the resolution process.

    2. Tax planning and strategy

    We can provide strategic advice on tax planning to minimize liabilities and take advantage of available tax benefits. This includes optimizing business structures, claiming allowable expenses, and ensuring efficient cash flow management to handle tax obligations.

    3. Financial record-keeping

    Maintaining accurate and detailed financial records is essential for compliance and effective business management.

    We can set up robust bookkeeping systems, train your accounting team (if you have one), and regularly review financial records to ensure everything is in order. This can prevent issues related to missing or incorrect information during audits or verification processes.

    4. Assisting with documentation

    We can help you gather, organize, and submit the necessary documentation to Amazon. This includes VAT registration lookup details, proof of business activities, and other required information. Proper documentation can accelerate verification and prevent payment delays.

    5. Professional advice and support

    We offer ongoing support and advice tailored to the unique needs of your online retail business. We can share insights into industry best practices, financial health assessments, and long-term planning to help you grow sustainably while staying compliant with tax laws and regulations.

    6. VAT registration and management

    We can handle the entire process if you need to register for VAT. This includes assessing whether your business meets the VAT threshold, completing the registration, and managing ongoing VAT reporting and payments.

    We can also advise on VAT exemptions and reliefs that might be applicable. Understanding how to verify VAT registration and perform an HMRC VAT registration number check can also be beneficial.

    Over to you

    Untangling the complexities of VAT requirements on Amazon can be challenging for many sellers. Understanding the Amazon seller VAT registration process is crucial for compliance and operational efficiency.

    To sell on Amazon, especially in the UK, you must complete Amazon VAT registration to ensure all sales are properly accounted for in terms of tax obligations. However, some sellers may wonder if selling on Amazon without VAT registration is possible.

    Generally, you might only need to register if your turnover is within the VAT threshold. Still, staying informed is essential as this can impact your business’ credibility and reach on the platform. For those who are part of the Amazon Marketplace VAT program, verifying and maintaining your registration details is essential.

    You can check whether a business is registered for VAT through HMRC. Ensuring your VAT status is correct helps avoid potential issues with compliance. It’s advisable to regularly use the HMRC check VAT registration tool to confirm the validity of your VAT registration number and ensure your business adheres to all necessary legal requirements.

    Remember, as long as you’ve submitted the necessary documents and have been paying your way, you’re in the clear. Contact Bradleys Accountants for any relief schemes you can apply to to tide yourself over — and hopefully, Amazon will unfreeze the accounts soon.

    If not, you can always write to the small business commissioner for help on how to proceed.

    Good luck!

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