2024 Amazon VAT UK changes – a guide for e-commerce stores

Vanessa Garcia
Amazon VAT UK Changes - Man writing in a notebook on a desk with a laptop and coffee

In 2021, Amazon VAT changed to encompass post-Brexit legislation. In 2023, Amazon once again changed the way VAT is calculated, and further VAT regulation updates have already come into play in early 2024. Such large legislative shifts can have a trickle-down effect even if you currently aren’t registered for VAT. Let’s look at what’s changing and how it affects your e-commerce store.

In December 2020 alone, 11,166 new third-party sellers joined Amazon Marketplace in the UK. E-commerce entrepreneurs continue to find Amazon a great way to get their products in front of Amazon’s ready-made audience. If you are one of the many using Marketplace to sell your products, you need to ensure you are adhering to the new regulations.

One of the most notable is the digitalisation of VAT return filing. This is particularly important for Amazon FBA sellers as Amazon move towards aligning themselves with HM Revenue and Customs (HMRC) roll out of initiatives to make tax digital.

Myth Debunking

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We want to clear this up for you straight out of the gate. Many e-commerce entrepreneurs have misunderstood the current guidance and believe Amazon will now be responsible for collecting all UK VAT. This is most definitely not the case; Amazon will collect VAT in particular scenarios, but you are still generally liable. Keep your Amazon FBA account up to date with your VAT registration to avoid nasty surprises and ensure your store is compliant.

The VAT rates that Amazon or sellers on Amazon who are enrolled on the Amazon Tax Calculation Service, are varied depending on the country sale.

Sellers should note that how Amazon will change how percentage sale fees are calculated using the Amazon Tax Calculation service. This change will increase shipping costs and make the Amazon shopping experience more expensive.

B2B and B2C

The treatment of B2B and B2C sales is now different when your goods are sold from overseas. Amazon VAT treatment will largely be related to B2C sales, but as some B2B sales occur on the platform, you will need to be vigilant in treating them accordingly.

If you would like to discuss how we can help you automate your systems through Xero for clear identification, please click here to learn more.

UK businesses with UK product (B2C)

If your e-commerce store is UK-based, you may find your situation remains unchanged. Complications arise if you are dropshipping or goods are dispatched from a supplier outside of the UK but if your product is in the UK, you can continue as normal. In the following scenario, Amazon will collect VAT for you:

N.B. If your goods are of a greater value, you will be able to account for them as you previously did.

Non-UK businesses (B2C)

If your e-commerce store is based outside of the UK and you are shipping B2C, Amazon will do all the heavy lifting, collecting VAT for you if goods of any value are sold to UK customers.

Amazon VAT UK changes - woman typing on laptop with an open notebook and coffee cup on the desk. She is out of shot with only her knee and arms visible.

All B2B sales

Amazon VAT rules have not changed for B2B sales. Amazon will not collect the VAT; you must account for it as you did before January 1st, 2021.

You will know if a sale is B2B by whether the customer has a valid UK VAT number. All VAT-registered accounts are categorised as B2B and all others as B2C.

UK to EU sales

From the start of 2023, Amazon no longer includes the UK in its PAN EU fulfilment network. This means, devastatingly for some e-commerce entrepreneurs, that it is no longer facilitating sales to the EU from the UK. We are hopeful that future trade deals may rectify the situation, but for now, you will no longer be able to sell from the UK to the EU via Amazon and, as such, have no VAT implications.

Sellers are likely to receive requests for information from Amazon to confirm where their business is established, and providing this information is a requirement under UK VAT law. While you may have already provided some information in the past, legislation updates in 2024 may require you to submit additional information. While Amazon will contact sellers should they need this information, you can view a full list of required documentation here.

Amazon VAT rates when they collect

If Amazon collects VAT on a transaction, you still need to include it on your VAT return, but it should be listed as zero-rated. This means you do not pay VAT again and should be declared in box 6 of your return. Zero-rated is not the same as exempt and means you can still reclaim VAT paid during the completion of the transaction.

Flat-rate scheme

As VAT collected by Amazon is zero-rated, it still counts towards your taxable turnover. This is bad news if you are currently on the Flat Rate Scheme and your sales are predominantly made up of B2C sales. In this case, we will be happy to discuss whether you would be better off on the standard VAT scheme.

Next Steps

If you are selling on Amazon FBA and are still unclear on your VAT implications, we would be happy to help. 2024 is a tumultuous year for so many as we transition to new and still-developing legislation. We can give you the confidence and advice you need to grow your e-commerce store to its true potential.

The best time to act is now email your ecommerce accountant today.

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