Problem with Amazon

Hello, the company recently received information from Amazon about the suspension of his business on the amazon platform due to unmet UK business establishment requirements. The company is classified as a Non-established taxable person even though it is a British company but does not have a physical headquarters in the UK. Therefore, the company cannot pass Amazon's verification and Amazon wants to collect VAT from the beginning of client sales to now. So far, the company has imported goods from European Union countries and paid VAT on imports. The goods were stored in the UK and sold from the UK to customers via Amazon. In November, company submitted an application for VAT registration because he exceeded the VAT registration threshold, but he has not been registered yet. Because of that, I have a few questions. 1. If the company is registered for VAT, will it be able to account for VAT in two ways? The VAT on sales on Amazon would be accounted for by Amazon and the VAT on sales through its own online shops would be paid by the company. Would this solution be OK? 2. Is it correct that Amazon wants to collect VAT from the first sale and not from the moment when the company crosses the VAT registration threshold? The company is a UK entity so it should be subject to the VAT registration threshold of £85,000? 3. Will the company be able to accounting VAT on imports using Postponed VAT accounting if Amazon pays VAT on sales on their behalf ? 4. In this situation, will the company be able to reclaim VAT paid on import after the date of VAT registration? 5. The company has not yet accepted that Amazon may collect and pay VAT on its behalf. Should company wait until it is registered for UK VAT? Thank you in advance!

Hi Emma12,
It is crucial that HMRC have the correct status for businesses in terms of the business being either a UK established business or a NETP.
This status should also be communicated to the marketplace in order that the marketplace can account for the VAT correctly on behalf of the business.
If the business is a NETP and they are selling goods of any value from a warehouse in the UK via a marketplace then it is the responsibility of the marketplace to account for the VAT on the sale of the goods.
Please see the guidance below:
VAT and overseas goods sold directly to customers in the UK Goods that are in the UK at the point of sale
1/ There are two ways of accounting for VAT for overseas traders who either sell their goods via a marketplace or sell goods directly to their customers.
If the overseas business sells goods directly to a customer below a value of £135 via the marketplace then the marketplace should account for the VAT on these sales.
If the overseas business sells goods directly to customers in the UK without the use of a marketplace then the oversees seller has the reponsibility to account for the VAT
Please see the guidance below:
Changes to VAT treatment of overseas goods sold to customers from 1 January 2021 Goods located outside the UK at the point of sale
2/ If it is determined that the business is a NETP then the responsibility to account for VAT would have been with the marketplace from the first sale”.
3/ Postponed VAT Accounting is only relevant if the business is the importer of record and the goods are above £135 in value.
Please see the guidance below:
Check when you can account for import VAT on your VAT Return
The VAT Registration threshold will only apply to UK established businesses. If the business is classed as a Non Established Business then the threshold will not apply and Registration would need to made upon the first sale of goods.
Please see the guidance below:
Who should register for VAT (VAT Notice 700/1)
4/ .If the company registers for VAT then it can recover VAT on imports made after VAT Registration.
There is also an entitlement to recover VAT as input tax incurred prior to VAT Registration if the goods are still on hand on the date of Registration.
Please see the guidance below:
VAT guide (VAT Notice 700) 10. Introduction to input tax
VAT guide (VAT Notice 700) 11. Input tax when VAT paid on goods and services received before VAT registration
5/ it is for the business to satisfy themselves if they are NETP or not, and to register and account for VAT accordingly.
After this decision has been made then the rules described above are mandatory to follow
Thank you.

Just reiterating point 2. If the UK entity passed the establishment tests, then the UK company could avail of the £85k/£90k VAT registration threshold, so all those sales on Amazon that were made on the understanding that the UK company was UK established, those sales were not subject to VAT as no requirement to register for VAT. if you are saying that the UK entity is actually non-established, then there is a Nil VAT registration threshold for non-establish businesses, so all sales made on Amazon are subject to VAT, including all the historical sales. Amazon is liable for this output tax and will pay this to HMRC, but then Amazon will seek to recoup that VAT payment from you and will suspend your Account until you pay Amazon. Whether you obtain a UK VAT number or not, the UK company will still be non-established for VAT purposes. the Nil VAT threshold will still apply. UK establishment is a matter of fact. If the control/ownership is by overseas owners/Director or there is no UK resident director or UK control, then it will likely be seen as non-established. Likewise, renting a warehouse does not create a UK establishment for VAT purposes. The UK address cannot be virtual or an Accountants, the address must be capable of receiving customers or business related supplies, an Amazon warehouse is not going to allow customers to arrive at the gate or for the Accountant to arrive to "meet their client", likewise a virtual office does not generally receive guests or allow deliveries to be received.

Hi, If a NETP had Vat Registration from day one of the sales and had paid any payable VAT to HMRC in the past, then what way could this be settled with Amazon and with HMRC.

Hi,

If a NETP are selling goods below £135 and are using a marketplace to facilitate their sales then it is the responsibility of the marketplace to account for the VAT from the outset.
If the NETP has paid over the VAT to us incorrectly then you would need to complete an error correction in order to recover the VAT and then pass this money over to the marketplace so that they can pay us. You can see the guidance here:

Correcting VAT errors on a return already submitted

Thank you.