Starting 1 August 2024, Amazon’s new policy will introduce new VAT charges on various fees, affecting UK sellers. Grasping these changes is essential for compliance and efficient cost management.
This happens because Amazon will transition from Amazon Services Europe S.à r.l to Amazon EU S.à r.l for invoicing. Amazon’s new VAT policy will apply a 20% VAT to referral fees, Fulfillment by Amazon (FBA) fees, and other charges, aligning with UK VAT regulations.
Impact on VAT Registered Sellers
VAT-registered sellers will see a 20% VAT on Amazon fees, which can be reclaimed from HMRC.
Sellers must update their accounting systems to switch from Reverse Charge Expenses to standard VAT accounting. Proper bookkeeping will be essential for VAT reclaim and compliance.
Impact on Non-VAT Registered Sellers
Non-VAT registered sellers will incur increased costs as they cannot reclaim VAT.
This change may necessitate re-evaluating business strategies and considering VAT registration to mitigate financial strain.
Strategies for Sellers as Amazon Charge VAT on Seller Fees
Sellers to avoid the impact of VAT on Seller Fees will need to:
- Enhance bookkeeping and tax planning.
- Seek professional advice to navigate these changes and calculate the right profitability
- Implement cost-saving measures to offset increased expenses.
VAT can be a complex tax, but it doesn’t have to be. For small businesses, in particular, there are a number of VAT schemes that can simplify the process and make it easier to comply with the VAT rules.
