The UK is due to formally exit the EU’s Single Market and Customs Union on 1 January 2021. With Brexit, the UK is expected to introduce a new set of VAT rules (which are as yet unclear) which may change the way that VAT is accounted for on sales to UK customers. Amazon have issued guidance to their e-commerce traders to outline how they will be changing the way they collect VAT from 1 January 2021 and this blog will highlight some of the key points to be aware of.
From January 1, 2021, Amazon will be responsible for collecting UK VAT on the following sales of goods delivered to customers in the UK where ordered through any Amazon storefront:
- Goods delivered from inventory stored outside the UK with a shipment value of up to £135; and
- Goods delivered from inventory stored in the UK, irrespective of value, where the selling partner is not established in the UK.
Where either of these supplies take place, Amazon will calculate and collect UK VAT from the customer at checkout and remit this directly to the UK Tax Authorities. Sellers will not receive the UK VAT amount in their disbursements nor be required to remit these amounts to HMRC. Previously Amazon had a VAT exemption for sales of goods under £15, where goods are delivered to UK customers from inventory stored outside of the UK, but this will be removed from January 1, 2021 – UK VAT will be calculated and collected by Amazon on these sales irrespective of their value.
Traders will remain responsible for accounting for any UK VAT on any other supplies including supplies to UK VAT registered business customers. In general, supplies to UK VAT registered customers are not affected by the changes. The new VAT rules in the UK are expected to affect businesses who are either:
- Delivering goods to UK customers, who are not registered for UK VAT, from outside of the UK; or
- Delivering goods to UK customers from inventory stored in the UK, who are not UK VAT registered, and your place of establishment is outside of the UK.
Amazon sellers should therefore ensure their seller central account VAT details are up to date and check that their prices listed on Amazon’s European storefronts are inclusive of VAT. They should also provide confirmation of their actual ship-from address when confirming shipment and make sure to ship each order received to a customer in a separate single shipment according to the order number. Traders will need to remain VAT registered in order to import goods into the UK.
In conclusion, from 1 January 2021, Amazon will be taking care of paying VAT on sales to UK clients and the VAT will be deducted before sellers receive their disbursements from Amazon. Uncertainty surrounds the Brexit negotiations, and it is not clear what the full VAT picture will look like for EU and UK trade, but sellers should ensure that the steps discussed above are taken to be ready for the changes when they are imposed. Please contact FKGB Accounting if you are an Amazon trader who needs assistance with fulfilling your VAT reporting obligations.
