As NETP, should I include sale via Amazon.uk in my FRS calculation?

Dear HMRC colleagues, We are a non-UK established online seller, and we sell goods via Amazon.uk. We have been VAT registered from the first sale made in the UK, and are currently under Flat Rate Scheme (FRS). We understand that we need to include all taxable supplies in our FRS VAT returns, which include those 0-rated goods. However, we noticed the VAT guidance said that: "Any sales a seller makes through an online marketplace, where the online marketplace is liable to account for the VAT, will not be included in the Flat Rate Scheme calculation from 1 January 2021." https://www.gov.uk/guidance/vat-and-overseas-goods-sold-directly-to-customers-in-the-uk Also, another VAT guidance stated that "When the goods are sold to the customer, the overseas seller will be considered to have made a zero-rated supply of the goods to the online marketplace, known as a ‘deemed supply" https://www.gov.uk/guidance/vat-and-overseas-goods-sold-to-customers-in-the-uk-using-online-marketplaces Therefore, my question is that Whether we need to include those sales that are marked as "Marketplace responsible" in our FRS taxable turnover calculation? For example, there were over £8k worth of UK local orders/sales via Amazon.uk last quarter. On the Amazon VAT Transaction Report, it clearly stated as TAX_COLLECTION_RSPONSIBILITY "MARKETPLACE". These would be deemed as 0-rated goods sold from us to Amazon. Should we include these £8000 in our FRS VAT return calculation? Thank you very much for your clarification. Best regards,

Hello.
We need to look at your supply in two separate parts.
The first part of guidance you refer to in your example is for the sale of goods from Amazon to the end customer.
As Amazon is accounting for the VAT on this transaction it would be excluded from your flat rate calculation.
The second part of guidance regarding the zero-rated deemed supply relates to the goods that you have imported into the UK and then are deemed to be supplying to Amazon.
The purpose of this is to allow a business to reclaim the import VAT they may be incurring on bringing the goods into the UK.
Zero rated supplies are included in the flat rate scheme calculation.
However, this scheme may not be appropriate for your business as you would end up paying VAT on a supply where you have not charged VAT and the flat rate scheme would not allow you to separately recover the import VAT.
A business may leave the flat rate scheme whenever it wishes please refer to notice 733 section 12 :
Leaving the scheme

Dear HMRC Admin 10 Thank you very much for your detailed explanation. We have follow-up queries regarding this issue. The “two separate parts” still seems to be the same transaction but from two different perspectives. In the first VAT guidance "Any sales a seller makes through an online marketplace, where the online marketplace is liable to account for the VAT, will not be included in the Flat Rate Scheme calculation from 1 January 2021." https://www.gov.uk/guidance/vat-and-overseas-goods-sold-directly-to-customers-in-the-uk We sold goods through our Amazon Seller Account. If they were under £135, Amazon will be liable to account for the VAT. On the Amazon VAT Transaction Report, it clearly stated as TAX_COLLECTION_RSPONSIBILITY "MARKETPLACE". Therefore, according to the guidance and your explanation, we do not need to account for these transactions in our FRS VAT returns, as you mentioned that “Amazon is accounting for the VAT on this transaction it would be excluded from your flat rate calculation.” In the second VAT guidance: "When the goods are sold to the customer, the overseas seller will be considered to have made a zero-rated supply of the goods to the online marketplace, known as a ‘deemed supply" https://www.gov.uk/guidance/vat-and-overseas-goods-sold-to-customers-in-the-uk-using-online-marketplaces As we are using Amazon, “when the goods are sold to the customer”, these goods would be sold by our Amazon Seller Account. Still, the same, on the Amazon VAT Transaction Report, it clearly stated as TAX_COLLECTION_RSPONSIBILITY "MARKETPLACE". However, based on this guidance and your explanation, we need to treat them as “deemed supply” which was zero-rated. Then, that means we have to apply the FRS VAT rate on these “deemed supply”. It seems that the two guidance conflict with each other. Therefore, to make it clear, could you please clarify whether we need to include the transactions from TAX_COLLECTION_RSPONSIBILITY "MARKETPLACE" in our FRS calculation? Best regards,

HMRC are correct and I think you may be misunderstanding the transaction flow when an overseas supplier sells via Amazon/online marketplace.There are two sales : 1. First you (as supplier) sell the goods to Amazon/Online MarketPlace. That sale is zero rated (You to Amazon) as per "When the goods are sold to the customer, the overseas seller will be considered to have made a zero-rated supply of the goods to the online marketplace, known as a ‘deemed supply". This is stage one. 2. Second, Amazon makes the sale of those same goods to the end customer, that sale is whatever the VAT rate is and Amazon accounts for the VAT on that sale (Amazon to customer). The guidance states "Any sales a seller makes through an online marketplace, where the online marketplace is liable to account for the VAT, will not be included in the Flat Rate Scheme calculation from 1 January 2021." This is stating that the sales that are made by Amazon/online marketplace are not your sales, so you do not need to include the value of the sales Amazon makes under your flat rate scheme calculation. But you still make a sale of the goods to Amazon first and it is that sale, zero rated, which is subject to VAT under the flat rate scheme. It is unwise to operate flat rate scheme because i) you have to declare VAT on the zero rated sale you make to Amazon and ii) you cannot reclaim import VAT when the goods are imported into the UK. When goods enter the UK they will be subject to import VAT, your freight agent might default to using Postponed Import VAT Accounting (PIVA) and you may not even be aware that import VAT has been postponed/not paid by freight agent when the goods cross the UK border. You may discover that you have import VAT that you are unaware that you have to declare on your flat rate VAT return (see link below, section 6.5) https://www.gov.uk/guidance/flat-rate-scheme-for-small-businesses-vat-notice-733--2 To answer your question, you do not need to include the transactions "TAX-COLLECTION-RESPONSBILITY_MARKETPLACE" in your FRS calculations as those sales are made by Amazon/Marketplace, but you do need to include the value of the deemed supply from you to Amazon in your FRS calculation and pay whatever your flat rate percentage is.....this is bad, you are declaring a flat rate percentage of VAT to HMRC on the sales you make to Amazon, those sales are zero rated so you are not collecting any VAT from Amazon but paying over a % to HMRC (ie, you zero rate sale to Amazon for £100/no VAT, Amazon pay you £100/no VAT, you declare say 6% of the gross, so you are paying £6 VAT to HMRC out of the £100 you received from Amazon. You may need to consider if the flat rate scheme is the right scheme for you, This is

Hi,

The guidance can be confusing as it doesn't clarify the two different Flat Rate Scheme (FRS) treatments for the two different scenarios.

In the scenario where the goods are sold directly to the consumers in the UK then this calculation is not done under the FRS.

In the scenario where the goods are in the UK at the point of supply (they are being stored in a warehouse in the UK), then a deemed supply is taking place between your company and the marketplace and this supply would be calculated on the FRS.

That's why we would always recommend to look at the benefits and drawbacks of being on the FRS and if the scheme is not beneficial to you, then it would be best to withdraw from the scheme.

Thank you.

Dear HMRC Admin 2 Thank you for your reply. 01. For the point: "In the scenario where the goods are sold directly to the consumers in the UK then this calculation is not done under the FRS." Do you mean that we sold goods from overseas to UK end individual consumers directly? For example, we still sell goods via Amazon UK, but the goods were not stored in the Amazon Fulfilment Centre, and we just posted goods to UK consumers directly from our overseas warehouse/factor. Please confirm my understanding for the first scenario. 02. For the point: "In the scenario where the goods are in the UK at the point of supply (they are being stored in a warehouse in the UK), then a deemed supply is taking place between your company and the marketplace and this supply would be calculated on the FRS." Do you mean that we still sell goods via Amazon UK, but those goods were already stored in the Amazon UK Fulfillment Centre? Please confirm my understanding for the second scenario. 03. For these two scenarios, I think they would have the same effects on the Amazon VAT Transaction report. It would show that "MARKETPLACE". under the title "TAX_COLLECTION_RSPONSIBILITY" Therefore, among thousands of transactions for each VAT return periods, it would be hard to differentiate which supply would be calculated on the FRS and which were not. Do you have any suggestions in terms of this problem? Thank you for your patience and continuing support. Best regards

Hi Andy
Your understanding of the first scenario is correct.
In the second scenario ,this means that because the goods are stored in the UK by Amazon there is a supply being made by yourself to Amazon and even though this deemed supply is at the Zero rate of VAT it has to be treated within the Flat Rate Scheme.
I wouldn't be able to help in tems of differentiating between the supplies you make which would be and would not be calculated on the Flat Rate Scheme.
I would remind you though to take a close look at the Flat Rate Scheme to see if it benefits your company.
The Flat Rate Scheme disallows you from recovering the VAT on goods for resale and so any import VAT which you incur before the goods are stored in the wharehouse would be irrecoverable.
Thank you