Becoming VAT registered
Good afternoon everyone,
Please bear with us and don’t judge straight away.
We are going to hit the £85k mark in few days, therefore VAT registration will be essential.
A lot of people sees it as a nightmare, and it is a nightmare especially if you don’t understand it, but we see this as a sign of business going in the right directions after substantial losses during the pandemic with sales growing now each month. The way we look at it is: you can’t become a millionaire or acquire wealth by staying under VAT threshold all the time. We would rather put all the effort into growing the business rather than trying to cheat the system.
We are opening new companies for new brands, not VAT registered straight away, but that is mainly to keep certain new brands separately from the others.
We have been looking thru the forum and Amazon pages, so the information is there. This doesn’t change the fact that we just don’t understand the VAT, at least not yet. This will change with time tho.
Is it a bit of a headache, frightening at the beginning? Yes, it is, which is why we are here to ask some probably obvious and silly question. My apologies.
We do have an accountant and no, they are not ecommerce specialists, but with enough knowledge on our end and being able to provide relevant documents to them, or even creating a separate accountant login, I believe there is no need to be concerned as they deal with VAT every day.
- Registering a VAT number on Amazon: is it straight forward, are there any delays, temporarily account suspensions etc we should plan for?
- Do we need VAT Calculation Service from Amazon, and if not, are there any serious benefits worth considering it? I assume not if we have an accountant?
- I admit, this is probably one of the silliest questions.
One of Amazon Assistants mentioned in the post from 2013 that once you are registered you won’t be charged VAT on FBA fees, is that correct? If not:
How do we claim/present to accountant VAT paid on FBA fees?
We have seen VAT/TAX on the PPC invoices, but it’s not showing on the Statement View or in the flat file, or will it show up automatically after we register for VAT on Amazon?
Date Range Report is not showing VAT amount either, it just says that all prices are inclusive of VAT. - What is the best way to assist our accountant when it comes to VAT related to Amazon? A separate, but restricted login?
- We went to edit one of our products to see if there is ex vat price box, but there was no option. Again, will this become available once we are registered on Amazon?
We can’t increase our prices, so will there be a tick box saying this price is inclusive of VAT already and we will just have to absorb the VAT?
There will be more questions over the next few weeks, but we just wanted to get the ball rolling on here to educate ourselves and see if we can get any straight answers to some of the simple questions on the subject we just don’t understand yet.
Any criticism is welcomed, just bear in mind, you all have been there (VAT sellers on here) 
We appreciate your help no matter how big or small it might be.
Thank you very much and have a good day.
Regards,
Marc
16 replies
Seller_PUgTge8LPB8FY
I don’t have time to answer all your questions, but I’ll respond to a couple.
Provide him/her with accurate and timely accounts.
I would advise against that, for reasons of account security.
Yes. The very reason we ourselves registered for VAT from the outset. No sudden drop in profit margins when crossing the threshold later.
Seller_qZO3ZCjoBXEeL
Talk to your accountant about VAT disaggregation rules.
Your separate companies can have nothing to do with one another, no shared resources, no one company propping up the other, no staff from one company doing work for the other, no sharing of bank accounts, buildings etc.
VAT disaggregation is a very serious issue and HMRC will take your business apart with a fine-toothed comb if they feel that is what you have done.
There is no reason to have a different company or legal entity in order to operate multiple brands. You will seriously struggle to operate more than one Amazon store account if that was your thinking.
Seller_tRuvBEHDedp4q
First there is no need to give your accountant every single transaction. All they need is the total of all sales (inc shipping).
You also do not need to use an accountant to calculate it at all - it is not that difficult.
As HMRC are pushing everyone into making tax digital I would ask your accountant what package they recommend. Many firms now have licenses with various packages. You then record your sales, purchases etc in the package and give your accountant access to this info and not your whole Amazon account. There are companies who will also automatically transfer Amazon orders into the accountancy package - but they can be expensive. Personally I just get a monthly report totalling sales on Amazon and just enter this figure into the package as a sales line. The package will then work out the VAT due etc. You may have several lines depending on your sales e.g.
Amazon sales Jun 2021 (standard vat)
Amazon sales Jun 2021 (zero rated vat)
Amazon sales Jun 2021 (exported sales - no VAT due)
You can get a csv report from Amazon, import into a spreadsheet and use calcs to get these figures - but there are other ways too.
You also enter into the package all purchase invoices. I use Xero. After entering all the info I can get it to calculate VAT and submit my quarterly VAT return - with no input from my accountant. I only use my accountant once a year to do my self assessment form - as you are setting up companies you may need to consult your accountant more often.
No you do NOT need to register and use the Amazon VAT Calculation Service. My personal view is that I prefer to keep an eye on my own tax affairs. If Amazon make a mistake, at the end of the day, it will not be them who gets in trouble with HMRC but yourself. The only advantage of using VCS (in my opinion) is that Amazon gives your listings a boost.
The Amazon Assistant is correct. Once registered for VAT with Amazon they do not charge VAT on their fees. However, you do still have to account for this using the ‘reverse charge’ system. Basically, it means you have to calculate the VAT that should have been charged and then you add it to both the ‘VAT to reclaim’ and ‘VAT to pay’ boxes on the VAT return (the net effect is they cancel each other out). If using an accountancy package then when you enter the Amazon invoice for fees you just need to code it as a ‘reverse charge’ invoice and the package will do this for you.
When you become registered you will need to set the Product Tax Code (PTC) on all your products correctly. This can be done via a file upload. Strictly speaking, if you are not using VCS and all your sales are to the UK, then you have no need to set the PTC. If you are going to use VCS or you sell internationally, then you must set the PTC correctly.
Your items on Amazon must be listed inc VAT. So you will not see an ex VAT price box. You enter the price inc VAT and set the PTC for the product.
Once registered then yes you will not make so much profit on your sales - but you can also reclaim any VAT on your purchases (not just stock but also on stationery, business equipment, utilities, etc). So although your profit will probably drop - it won’t be by 20%.
Seller_tRuvBEHDedp4q
I meant to add on the VCS:
Do not forget that this system only submits the info on your Amazon sales. It does not include sales from other markets or your purchase invoices. These still have to be calculated and submitted. Which is another reason I do it myself and not use the VCS.
Seller_m41AtDwctiAFL
Good evening everyone,
Apologies for another late reply. Crazy year so far.
Thank you, very much appreciated. This is exactly what we needed and more to be honest.
Demel,
Your experience will help us to avoid this sort of hiccups, thank you. Just seen the VAT option on the account info page, so it looks pretty straight forward.
PeterB,
I hear you Peter and it’s a fair assumption, should have maybe explained it a bit better. In normal circumstances yeah, I agree, but we are not doing it to avoid VAT.
We are basically separating an automotive brand from beauty brand. We go for the high quality in everything we do and genuinely provide a unique product, which comes with a premium price tag.
Both markets are very competitive and in today’s online world, competitors could do some serious damage to both of them if they all are under one umbrella.
It is quite common for big sellers on Amazon to run 2 or 3 accounts/businesses in similar situations.
The only shared thing between the two businesses are: the director and registered address. That’s it.
Thanks for pointing that out tho, it forced us to triple check everything.
We may even move the new company to a completely new address, but I don’t think that is necessary.
Simply_NikNaks1,
That is a lot of valuable information, thank you again, much appreciated.
Yeah, they’ve been pushing for digital tax for a while now. We will go that route as well, but for the first year we will stick with an accountant.
I do like Xero and we’ve got few friends using it for their non Amazon businesses and they speak highly of it.
We do like a good spreadsheet, so we will have a new one from August tracking all the income and expenses as well as the VAT for each, and will calculate automatically the tax due. Got a working file already, just needs some fine tuning. We will share that along with sales reports with our accountant.
We will leave the fees VAT to the accountant
Out of interest guys, is this the report you are using for your sales data?
Excel is good, but this report is pretty good too.
All our sales are in UK at the minute. We are planning expanding to the “brutal” US market at the end of next year, but that would be a brand new US company, bank accounts and all that, no link between the UK and US whatsoever.
I assume this option will activate automatically on the listing page once we are successfully registered on Amazon?
After quick calculations and looking at the year so far, it looks like our profit will drop by about 15-18%.
Oh yeah, we won’t be using VCS as we also have a store on eBay and couple of website with online stores, so a good spreadsheet and a good accountant for the first year of VAT and then we will see.
Guys, once again, a genuine and honest Thank You for all the help so far.
It is greatly appreciated !
Thank you once again and speak soon.
Kind Regards,
Marc
Seller_m41AtDwctiAFL
Morning everyone,
Thank you for continued advice, it is very much appreciated.
At the minute we are testing different plugins to see which one works best.
We run woocommerce on both websites as well.
What plugin do you use for automatic invoices as soon as the order comes thru?
I don’t see it either and should have probably choose a different address, but our registered address has pure purpose of being the director’s registered address and to hide our home address too.
It’s a physical address provided by UK Post Box.
Neither of the businesses have any employees, just a Director…and my partner, which does help out, but has no links to the business and has a full time job in public sector.
Company A (current business which goes VAT next month) as well as Company B (new business) are both FBA and website orderes are fulfilled via MCF.
But, company A sends some of the stock directly to customers from residential address (UPS pick up).
New business will be 100% FBA and MCF.
I am glad you have picked on this originally Pete, as it forced us to triple checking everything as already mentioned.
We have been communicating with our accountant on weekly basis. After reading VAT disaggregation rule again, the found two potential problems, which we have dismissed last time (in BOLD):
Financial
- Businesses have the same bank account
- A common business profit or financial interest that benefits both businesses
- Financial dependency on one another.
Economic
- Sharing equipment
- Operating from the same offices
- Sharing advertisements.
Organisational
- Common employees and/or managers.
Business is conducted from our home address using privately owned equipment (PCs, laptops, printer etc) and we have received this reply from our accountant after revisiting this issue with her again:
HMRC looks at the follow links:
- Separate business bank accounts
- Separate business records
- Business registered separately for tax and submitting their own returns
- Transparency e.g. customers and suppliers knowing exactly which business they are dealing with
- Transactions between affected businesses being carried out at arm’s length and charged accordingly in the accounts
We do comply with all of the above.
Another possible way out of it would be for new company to go VAT straight away.
Not so much for HMRC, but Amazon’s verification process, same address could be an issue, but it’s not mentioned in their TOS. Last thing we want is to start changing the director’s registered address with bank, HMRC and IPO office while having live trademark applications.
Guys, thank you very much once again !
Have a good week and speak soon.
Kind regards,
Marc
