The United Kingdom will officially exit the European Union’s Single Market and Customs Union on January 1, 2021 as part of its Brexit plan. As it does so, the UK will begin to enforce new VAT (value-added tax) rules that will affect how Amazon and its sellers do business inside and outside of the country. Here’s a look at what effects these VAT changes will have on your sales in the UK and what you should do to prepare for these changes.
How the VAT changes work and what they will affect
Starting on January 1, 2021, Amazon will automatically collect VAT on any sales of goods from all Amazon storefronts that meet the following criteria:
- 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 you, the selling partner, are not established in the UK.
On those purchases, the UK VAT will automatically be calculated and collected from the customer at checkout and will be remitted directly to the UK Tax Authorities. This means that sellers will not be required to remit these sales to the tax authorities and will no longer receive the VAT amount in their disbursements.
The current VAT exemption for sales of goods under £15 will no longer exist after this update. The UK VAT will be collected and remitted on all purchases with a shipment value under £135.
How to make sure your Amazon store is ready for these VAT changes
For most Amazon sellers, this new system is going to be an improvement. Having UK VAT automatically calculated, collected, and remitted means less work for sellers who sell to or in the UK that previously had to do that work on their own. But while VAT changes will go into effect automatically and won’t require much work from the seller’s side, sellers are still advised to read Amazon’s report on the VAT changes in full so that they can understand them and make updates to their storefronts as needed. Consider the following tips to address the changes.
Confirm your Seller Central account details are up to date.
It is important to review that your current business address, default shipping address, and VAT registration number for countries in which you hold inventory are all accurate and up to date. You will be required to provide the actual ship-from address when you confirm a shipment that is being directly to a customer.
Ensure your pricing settings include applicable VAT.
Sellers that took advantage of the previous VAT exemption on sales of goods under £15 will no longer receive that exemption under the new UK VAT laws. Go over your inventory and make sure that all supplies that ship to and from the UK have VAT included in your list prices.
Check the changes in your VAT invoicing and reporting details.
Both the “Amazon VAT Transaction Report” and the “VAT Calculations Report” on your Amazon Seller Central page will now include two new categories:
- Tax Reporting Scheme; and
- Tax Collection Responsibility
The tax reporting scheme will identify the tax legislation concerning the transaction. The tax collection responsibility will identify whether the VAT will be collected and remitted to the authorities by the “Marketplace” (Amazon) or by the “Seller” (you). Be sure to check these out in the early stages of 2021 to confirm that Amazon is properly collecting and remitting the taxes it is supposed to and to also make sure you don’t miss any that you are responsible for.
Understand all the shipping rules.
Amazon is clear about its protocol when it comes to shipping to customers in the UK:
Please ensure that each order received under a single order number is shipped separately to the customer if you ship goods to the customer directly. You must not split a single order number into multiple shipments or combine multiple order numbers into a single shipment.
Monitor the new changes with FeedbackWhiz’s Profit and Loss Tracking Tool.
FeedbackWhiz’s new Profit and Loss Tracking Tool is designed to review every aspect of your business to help you determine the most profitable and least profitable elements of your Amazon store. This tool includes Amazon fees and taxes like the VAT: reviewing your international sales and their profit margins to can help you decide which products are best to sell in which markets. With the new VAT laws making it easier than ever to expand into the UK market, consider enlisting the help of FeedbackWhiz to monitor your profitability.