When Should an Amazon Seller Register for VAT?

When Should an Amazon Seller Register for VAT?

Selling on Amazon can grow quickly. One month you may be testing a product, and the next you may be dealing with stock, storage fees, advertising costs, returns, supplier invoices and VAT questions.

One of the most important questions for Amazon sellers is: when do I need to register for VAT?

The UK VAT registration threshold

If you are a UK seller, you must register for VAT if your taxable turnover goes over the VAT threshold. HMRC currently states that you must register if your total taxable turnover for the last 12 months goes over £90,000. You must register within 30 days of the end of the month in which you exceeded the threshold.

You must also register if you realise your taxable turnover will go over £90,000 in the next 30 days. In that situation, HMRC says you must register by the end of that 30-day period.

What counts as taxable turnover?

For Amazon sellers, taxable turnover usually includes sales of standard-rated, reduced-rated and zero-rated goods. It does not simply mean profit. It is based on sales value before deducting Amazon fees, advertising, refunds, product costs or shipping expenses.

This is where many sellers make a mistake. They look at profit instead of turnover.

Should you register voluntarily?

Some Amazon sellers register for VAT before reaching the threshold. This is called voluntary VAT registration. It may be useful where you want to reclaim VAT on purchases, import VAT, stock, packaging, software or professional fees.

However, voluntary VAT registration is not always the right decision. It can affect your pricing, profit margin and competitiveness, especially if you mainly sell to consumers who cannot reclaim VAT.

Amazon, overseas sellers and marketplace rules

VAT rules can be more complicated if goods are imported, stored overseas, stored in the UK, or sold through online marketplaces. HMRC guidance states that a UK seller using an online marketplace must register for VAT where their VAT taxable turnover is more than £90,000 a year. It also confirms that sellers should give their VAT registration number to every online marketplace where they offer goods for sale in the UK.

For overseas sellers, the rules can be stricter. HMRC guidance states that if an overseas seller owns goods of any value located in the UK at the point of sale, they must register and account for VAT on those sales.

Common VAT mistakes Amazon sellers make

Many Amazon sellers make these mistakes:

• Monitoring profit instead of taxable turnover
• Forgetting to include all Amazon marketplace sales
• Not checking whether imported goods create VAT issues
• Not keeping proper VAT invoices
• Not matching Amazon reports with accounting records
• Registering too late after passing the threshold

Need help with Amazon VAT?

Gondal Accountancy supports Amazon FBA, private label, wholesale, dropshipping and arbitrage sellers with VAT registration, bookkeeping, VAT returns and tax planning.