Ashley Edmonds

EDIT: This post can be deleted, as it's not exactly as I quoted. VAT will now be applied to seller fees and won't be claimable for Flat Rate Scheme or non-VAT registered businesses. Previously, Amazon automatically collected and remitted these fees, but now they expect sellers who are VAT registered to claim them back. This change leaves Flat Rate sellers and non-VAT registered businesses at a disadvantage, while HMRC benefits from the new system. It's a shame, as previously the fees were reverse charged, but this is changing.

Hello, Amazon has announced a change in the way they collect VAT from UK sellers, effective August 1, 2024. (Copy of there email at bottom of post) Currently, VAT is remitted by the seller [US] who then files VAT returns. Under the new rules, Amazon will automatically collect 20% VAT from the seller and remit it to HMRC. However, this creates significant issues for UK small businesses using the flat rate scheme, as we will end up overpaying VAT. For clarity, let me explain the situation: At present, I would collect £10 and file a VAT return at a flat rate of 7.5%, resulting in a VAT payment of 75p. Under the new rules, Amazon will collect 20% VAT and remit £2.00 to HMRC, resulting in a loss of £1.25 per sale. As a small UK business owner, this is devastating and threatens our viability compared to larger companies that benefit from bulk order discounts. This change undermines the advantages previously afforded to startups and smaller firms. To rectify this, there are two potential solutions: 1. Amazon should allow sellers to input their VAT rate in the backend of Seller Central and remit the appropriate amount to HMRC. For instance, if a seller is on a 7.5% rate, Amazon would collect 20% VAT but remit only 7.5% to HMRC, allowing the seller [US] to retain the remaining 12.5%. This mirrors the current system. 2. HMRC should permit reclaimed VAT on the flat rate scheme for overpaid fees from Amazon. Currently, reclaiming VAT is not allowed, but an exception should be made in this scenario. Without a solution, the flat rate scheme loses its benefits and small business owners will be severely impacted. Can someone provide clarification on how Amazon plans to handle VAT collection and remittance for flat rate scheme sellers? Thank you. _________________________________________ Effective August 1, 2024, Selling on Amazon, Fulfilment by Amazon, and all other services currently supplied by Amazon Services Europe S.à r.l. (ASE) will be supplied by Amazon EU S.à r.l. (AEU). All agreements, policies, terms and conditions currently referring to ASE, including Amazon Payments agreements, will be updated to AEU. Additionally, all invoices issued by Amazon will be issued by AEU instead of ASE after August 1, 2024. If your company is established in the UK, Germany, France, Italy, Spain, Netherlands, Poland, Belgium or Sweden, you will be invoiced by the AEU branch in your country of establishment. As a result, local VAT rules apply and VAT will be deducted from Amazon fees. In the majority of cases, we expect that you will be able to recover this VAT through your normal VAT return process. We recommend that you contact your tax advisor for more information on recovering VAT as per your country of establishment's local regulation. If your company is not established in the countries listed above, you will be invoiced by the AEU head office in Luxembourg, and there will be no change to how VAT is applied on Amazon fees. Note: This change doesn't impact your account access, listings, product pricing, customer reviews, selling services or the price of services. For more information, go to Update to Amazon UK and EU seller services entity and VAT treatment.