Amazon has recently begun targeting sellers on their UK platform that aren’t “established in the UK”. The implication of this is that we are seeing “holds” on seller balances for the VAT that Amazon believes is due, even if it has already been paid to HMRC. This is creating a stranglehold on some small businesses that many are struggling to escape. This article looks at what is happening, why and what can be done to get out of this situation.

If you are a business that is affected by this, please get in touch with us today and one of the team will let you know how we can help.

Background

So what do you need to know?

After Brexit (January 1, 2021), the UK introduced a new set of VAT rules. Included was the new UK VAT on e-Commerce (UK VOEC) legislation. The net result of which made Amazon responsible for collecting and remitting UK VAT on certain sales, including those of third party sellers, like you.

You can learn more about this law on the UK Tax Authorities website.

If you find this subject overwhelming, we've put together a blog that covers the fundamentals of EU VAT for ecommerce businesses.

Who is impacted?

Whether Amazon will begin collecting VAT on your sales depends on a few factors.

Per these new Amazon VAT rules, if you store inventory outside of the UK and ship orders to UK customers, then it depends on the shipment value of those orders.

If you store inventory in the UK and ship orders to UK customers, then it depends on Amazon’s determination of whether you are “established in the UK for VAT purposes” or not. 

Here is how Amazon handles this:

Regardless of the Amazon storefront (.co.uk, .de etc.) a customer orders from, Amazon is now responsible for collecting UK VAT on the following types of sales delivered to UK customers:

• Goods delivered from inventory stored outside the UK with a shipment value of up to £135.
• Goods delivered from inventory stored in the UK, regardless of value, where you, the selling partner, are not established in the UK for VAT purposes.

In either case above, Amazon will collect UK VAT from the customer at checkout and directly remit this to the UK Tax Authorities. You won’t receive the UK VAT amount in your disbursements and you won’t be required to remit these amounts.

Worth noting is that the previous Amazon VAT exemption for sales of goods under £15, where goods are delivered to UK customers from inventory stored outside of the UK, has also been removed. Therefore, the same is true for sales of this type.

There are some exceptions for sales of goods to customers in Northern Ireland, in which case you may remain the responsible party for the applicable UK VAT.

Of course, if you aren’t already collecting VAT, should Amazon begin doing so, this will affect your proceeds substantially.

Although the above should provide clarity on whether or not the marketplace will collect VAT on your Amazon sales, for many the confusing piece here is the term “established.” Who is and who is not “established” in the UK for VAT purposes?

How does Amazon determine if I am "established" in the UK for VAT purposes?

To abide by legislation, Amazon is required to determine whether you are “established” in the UK for VAT purposes or not.

Amazon may determine that your business is “established” in the UK for VAT purposes if your business is physically operated from within the UK. This means that if your UK business (even as a UK legal entity) does not have a physical address or operations in the UK, it would not be considered “established” in the UK for VAT purposes.

To make this determination, Amazon will request documents from you. We cover the required documents below, these will also help you determine the “establishment status” of your business.

What documents should I provide if I am established in the UK for VAT purposes?

If you are established in the UK for VAT purposes, you should email the required documents to kyc-drtax-verification@amazon.co.uk using the email address you have registered with Seller Central. The required documents depend on your legal entity.

I operate as a Sole Trader (natural person)

In this case, you will be required to provide Amazon with the following documents:

1. Evidence of VAT Registration (only if registered)

Provide your VAT registration number and ensure that:

• The registered name in HMRC VRN Checker matches your registered name on Seller Central.
• The registered address in HMRC VRN Checker matches your registered address on Seller Central.

You can review and edit the above details on Seller Central here.

If these details aren’t aligned, it’s unlikely Amazon will accept your documents. If you would like our help in ensuring this is updated correctly, get in touch with us.

If you are not required to be VAT registered in the UK, then you need to provide an explanation along with supporting evidence. If you need to register, read our blog on how to register for VAT.

2. Proof of identity

You must provide 1 of the below documents to verify your identity:

1. Full valid passport.
2. Full valid driving licence.

3. Proof of Address

You must provide 1 of the below documents to verify your address:

1. Full UK photo card driving licence featuring the residential address (only if not already used as a proof of identity).
2. UK council tax bill for the current year.
3. Utility bill in the name of the director/partner and dated within the past 180 days.
4. UK mortgage statement.
5. TV licence letter or direct debit schedule which confirms the name and address.
6. Electoral roll search in the name of the director/partner.
7. Landline phone bill (not a mobile phone bill) in the name of the director/partner and dated within the past 180 days.

4. Proofs of physical operational business address

Regarding Sole Traders, Amazon does not specify the documents for this section however our inkling is that it will match the requirements of this section for Limited Companies. If so, you will need to provide 2 documents, 1 from each of the following categories:

Category A

1. Either a recent UK council tax bill or business rates (current year) which are addressed to you, the sole trader.
2. A recent utility bill (within the past 180 days) which is addressed to you.
3. If you operate from a shared working space, either your licence agreement, or copies of invoices for rent. These should be in your name and for a period of 6 months or longer.

Category B

1. A copy of a recent invoice for goods or services used to operate the business and which is addressed to you, the sole trader, at your primary place of business.

Documents related to virtual office/mail forwarding locations will not qualify as proof of a UK primary place of business address. Amazon needs proof of a physical address.

I operate as a Limited Company, Partnership or similar

In these cases, you are required to provide Amazon with the following documentation:

1. Evidence of VAT Registration (only if registered)

Provide your VAT registration number and ensure that:

• The registered name in HMRC VRN Checker matches your registered name on Seller Central.
• The registered address in HMRC VRN Checker matches your registered address on Seller Central.

You can view and edit these details on Seller Central here.

If these details aren’t aligned, Amazon may not accept your documents. If you would like our help in ensuring this is updated correctly, get in touch with us.

If you are not required to be VAT registered in the UK, then you need to provide an explanation along with supporting evidence.

2. Evidence of physical operations at your UK business address

You need to provide 2 documents, 1 from each of the following categories:

‍Category A‍

1. Either a recent UK council tax bill or business rates (current year) which are addressed to the company itself or a director/partner of the company.
2. A recent utility bill (within the past 180 days) which is addressed to the company or a director/partner of the company.
3. If you operate from a shared working space, either your licence agreement, or copies of invoices for rent. These should be in your name and for a period of 6 months or longer.

‍Category B‍

1. A copy of a recent invoice for goods or services used to operate the business and which is addressed to the company at its primary place of business.

Where documents are in the name of a director/partner, that director/partner must be listed in UK Company House. Documents related to virtual office/mail forwarding locations will not qualify as proof of a UK primary place of business address.

3. Evidence of your legal entity’s registration at the UK Company House

Provide an extract from your trade registry from UK Companies House which includes:

• The registered legal name;
• The registered address; and
• A list of all registered directors.

This information must match the corresponding fields on your Seller Central account. If you would like our help with this process, get in touch with us.

4. Proof of identity and UK residence of directors or partners

Per the trade registry, provide the 1 of the following documents in each category for your directors or partners:

‍Proof of Identity‍

1. Full valid passport.
2. Full valid driving licence.

‍Proof of Residence in the UK‍

1. Full UK photo card driving licence featuring the residential address (only if not already used as a proof of identity).
2. UK council tax bill for the current year.
3. Utility bill in the name of the director/partner and dated within the past 180 days.
4. UK mortgage statement.
5. TV licence letter or direct debit schedule which confirms the name and address.
6. Electoral roll search in the name of the director/partner.
7. Landline phone bill (not a mobile phone bill) in the name of the director/partner and dated within the past 180 days.

In the case that any of your directors do not reside in the UK, you should provide written confirmation of this in your email reply to Amazon. No documentary evidence of this is needed.

5. Proof of Permanent Employment and UK Bank Account

In the case where 50% or more of your directors are non-UK residents, you must provide 2 documents, 1 from each of the following categories:

‍Category A‍

1. HMRC correspondence showing you have registered with HMRC for PAYE (in the past 120 days).
2. PAYE demand from HMRC or a screenshot of a PAYE return submission with an accompanying payslip or P60 for the employee (in the past 120 days).

‍Category B‍

1. A local bank account statement in the name of the company/partner/director which is dated within the past 120 days.

View more details on Seller Central here.

What documents should I provide if I am not established in the UK for VAT purposes?

If Amazon asks for evidence of your UK establishment but you aren’t established for VAT in the UK, then you want to respond to Amazon at drtax-nonestablished@amazon.co.uk using your Seller Central email address. Within your email provide:

1. A confirmation that you do not operate your business from within the UK
2. A confirmation of the non-UK country that you operate your business from.

Why am I only being asked for this now?

Amazon periodically reviews the status of sellers. They may be asking you for evidence of your UK establishment now after discovering that they have not yet confirmed the status of your “establishment.” It’s also worth noting that even if you have provided documents to this effect in the past, Amazon may review their determination periodically.

How long do I have to provide documents?

After receiving a notification from Amazon, you will have 30 days to provide all the required documents. If you don’t respond within the 30 days, Amazon may consider you as “not established in the UK.” This means Amazon will begin collecting and remitting UK VAT on your sales from the date of this determination. Importantly, in such a case, Amazon may also recover VAT due on sales since 1 January 2021.

Last word

Assess where your business stands regarding the new UK VOEC rules and take action on this to avoid any surprises. The Amazon VAT rules change frequently but you should now have a good idea of whether your business is “established in the UK for VAT purposes” or not and the applicable next steps. If you’d like us to help take care of these affairs for you, please get in touch with us today.