Amazon - not established for UK VAT purposes

Your disbursements have been deactivated in all stores you operate worldwide.

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Hi everyone, I'm hoping that someone can shed any light on this situation which is causing our small business a lot of distress.

As the title and description suggests, Amazon, one of the marketplaces that we sell our products on, have stopped all seller deposits until we prove our UK VAT status. 

We've had disbursements frozen for 3 weeks now whilst they prove that we are compliant. We have been paying VAT to HMRC for over 5 years and Amazon is not our only sales channel. We also sell on our own website and have thousands of UK based wholesale customers. Our business is incorporated in the UK and both directors are British. One of our directors is based in Portugal, but the other is based in London and has UK residency etc.

We have messaged the small business commissioner and our local MP to seek further advice. To the best of our knowledge, we are UK VAT compliant and have already submitted documents to Amazon. We have a UK warehouse which is where our business is conducted from and have a rental agreement, although our VAT address / company registered address is different (also a UK address - we had issues with post at our warehouse because it was a new build, so we switched it to one of the directors mothers).

In the email, Amazon state the following:

UK VAT on eCommerce legislation (live since 1 Jan 2021) requires Amazon to collect and remit VAT on all B2CUK sales performed by non-established selling partners to customer in the UK. As a result, we have to ask you to provide additional documentary evidence proving that your company is established in the UK in accordance with this legislation, within 60 days after receiving this notification. 

If you fail to provide the documentary evidence within 60 days of this notification, Amazon will conclude that you are not established in UK and will start collecting and remitting VAT on your B2C sales. In such a case, additionally, you will be required to pay the VAT amount to Amazon to account for the historical un-paid VAT on all B2C sales that fall under UK VAT on eCommerce legislation since 1 Jan 2021. further to this, you can continue selling on Amazon, but you will not be able to disburse any funds from your accounts, until any UK VAT owed is paid to Amazon.

It's now been over three weeks and we've not heard anything back. We're suffering a great degree of stress from this situation as we are relying on the disbursements to pay bills, stock etc. Furthermore, the thought of having to have VAT backdated when we have already paid this to HMRC, would mean that we would probably face bankruptcy.

Does anyone have any advice on why this might be happening and what we can do to expedite the situation? It's causing a lot of stress and anxiety for us all and we really don't know what we have done wrong and why we have received this email. 

 

Best regards

Chris

Replies (25)

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VAT
By Jason Croke
03rd Feb 2024 06:23

This is a HMRC campaign to stop overseas traders from pretending to be UK based.

You say you are a UK company but with an overseas Director. Is he the PSC (person with significant control) and the UK guy a minority shareholder?

Do you have any employees in the UK?

Renting a warehouse does not create an establishment in the UK, anymore than renting a virtual office or a physical room in a shared office.

Sounds like Amazon think you are a NETP, non established taxable person and if so, HMRC charge the sales VAT on your sales, not you.

Maybe engage with and speak to an accountant to help fix this.

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Replying to Jason Croke:
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By JungleC
03rd Feb 2024 06:37

Thanks for taking the time to reply.

Our directors have a 50/50 share in the business. The UK director considers the warehouse / office, as his main place of work and where business decisions happen. He oversees operations that happen in the warehouse. The other director flies back from time to time to conduct board meetings etc.

Directors are on PAYE. One director pays income tax to the UK, the other, to Portugal as that's where he is resident.

Both directors were UK based up until two years ago when the other director relocated.

I'm not sure why Amazon would consider us an overseas business, and HMRC for that matter, when we have always had a UK place of work and one of our main shareholders is British a d pays taxes in the UK.

Our VAT has always been calculated and paid by our accountant each quarter and this is made up of all platforms that the company sells on.

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By Leywood
03rd Feb 2024 08:55

Get your Accountant to sort it, rather than your MP.

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By paul.benny
03rd Feb 2024 09:10

I assume you have submitted documents in response to the recent request from Amazon? Three weeks is a little slow for what should, based on the facts you have described, be straightforward.

I do have sympathy with your plight. HMRC have defacto outsourced some enforcement work to amazon and eBay, making it harder for non-UK vendors to evade taxes. The way HMRC have done this is to place responsibility on amazon for sellers' compliance/

I don't think anyone here can help. The challenge you have is of finding an individual you can speak to at amazon to plead your case. When dealing with HMRC there are processes and statutory rights; amazon are largely defending their own interests and you have no rights.

Hopefully this is resolved for you with little further delay. If it's not, you may find the media more helpful for highlighting your case - specifically, The Guardian. They're no fans of amazon and selling an eco-product also helps push their buttons.

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Replying to paul.benny:
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By JungleC
04th Feb 2024 03:46

Thanks very much for your reply. I think that you're probably right - highlighting the issue with the media may be our best hope in finding a resolution. Amazon so far have been non-existent in their follow up.

I do find this whole affair rather incredible seeing as we've always been VAT compliant and submitted payments and documents whenever we have been asked. It's not as though we're a new, overseas seller. We've been trading for 6 years and have been paying VAT on time, in each quarter, for the last 5 years.

Hopefully the powers that be at Amazon will be able to come to their senses.

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DougScott
By Dougscott
03rd Feb 2024 10:47

Presumably you provided Amazon with your company registration and VAT Registration documents 3 weeks ago, in which case you need to find someone at Amazon who deals with checking these documents. Make a formal complaint to Amazon as well.

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VAT
By Jason Croke
03rd Feb 2024 10:48

With no PSC (50/50 UK/Non UK) then you'll need to prove to Amazon you are a UK established business.

Amazon can be the biggest issue here as they are judge and jury and if you want to sell on their platform it is them you need to satisfy.

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Replying to Jason Croke:
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By frankfx
03rd Feb 2024 11:13

Amazon are indeed the Judge and Jury.

This has elements of Post Office and Horizon.
No outside party that a business can refer to.

There must be numerous cases where Amazon and the other platforms are adopting an overly cautious approach.

This fails legitimate businesses and causes distress.

Livelihoods are at risk.

A reliable fast track approach is required, to manage expectations for all concerned.

IR35 compliance

I would add that when HMRC placed the burden on IR35 status compliance on the engaging company.
Most companies avoided the time cost and risks of directly engaging " IR35" freelancers.

Again causing distress in the sector.

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Replying to frankfx:
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By JungleC
04th Feb 2024 03:55

It feels a little surreal to be honest. We incorporated in the UK in 2018 when both directors lived in the UK. We registered for VAT the following year in 2019 and have paid it, on time, in every quarter since. Our bookkeeper calculates it using Sage with all of the sales platforms feeding into it.

It was only in 2022 that one of our directors moved to Portugal. Prior to 2021 and the change in e-commerce legislation for VAT collection, we paid it in the same way as we do now, so to have the threat of having it backdated is unfathomable.

We have a UK correspondence address and a warehouse in the same postcode. One of the directors uses the warehouse as the main place of work as it has an office, although most of the time he works from home. The correspondence address has always been consistent over the last 5-6 years. We only started renting a warehouse within the last 3 years and didn't think to change the address because the warehouse was a new build when we started the contract, and we had issues with RM not being able to find the place!

To think that we could be considered non UK resident for VAT purposes is bonkers.

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Replying to Jason Croke:
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By I'msorryIhaven'taclue
04th Feb 2024 09:01

Could a PSC be created? For example, by the UK director exerting significant control; or perhaps a 1% share transfer from Portugese director to UK Director.

What else is there to dress it up for Amazon? Service office address for director(s); perhaps the Portugese director could resign for a spell.

We've has something similar with Google Ads, and had to line up all our soldiers to comply.

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By FactChecker
03rd Feb 2024 15:06

Just to reinforce the post from Jason Croke (03rd Feb 2024 at 10:48) - supported by the others - that it is Amazon that hold the keys, and them that you have to convince to unlock their systems.
However unfair this is (which on the details supplied it appears to be), they are the ones being leant on by HMRC (in general but not about you specifically) and they control their own platform (including how they treat you).

So:
(a) have you adequately responded to their 'request' for you "to provide additional documentary evidence proving that your company is established in the UK in accordance with this legislation"?
You mention that "It's now been over three weeks and we've not heard anything back", but don't say how confident you are that you supplied the requisite 'proof' (e.g. did you get advice on what was needed)?
And do you have any form of acknowledgement that what you sent was received?

(b) Do you have any contact details (preferably of an individual not just a dept) to go with the case reference number - which you could provide to someone you appoint to try and resolve the situation?

Either way, you need to speak to a qualified adviser (and pronto because if Amazon start taking 'back VAT' from your account, then any resolution will get much harder).

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Replying to FactChecker:
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By JungleC
04th Feb 2024 04:02

I provided the documents that they asked for, but I'm still waiting to hear back. They acknowledged the email with an automated response.

We incorporated in the UK in 2018 when both directors lived in the UK. We registered for VAT the following year in 2019 and have paid it, on time, in every quarter since.

It was only in 2022 that one of our directors moved to Portugal. Prior to 2021 and the change in e-commerce legislation for VAT collection, we paid it in the same way as we do now, so to have the threat of having it backdated is unfathomable.

We have a UK correspondence address and a warehouse in the same postcode. One of the directors uses the warehouse as the main place of work as it has an office, although most of the time he works from home. The correspondence address has always been consistent over the last 5-6 years. We only started renting a warehouse within the last 3 years and didn't think to change the address because the warehouse was a new build when we started the contract, and we had issues with RM not being able to find the place!

I provided them with our VAT certificate, although they have had it for the last 5 years. I gave them copies of our companies house information, PAYE screenshot for our UK director, rental contract in the company name for our warehouse, a suppliers contract in the UK, bank statements etc.

To think that they could start taking back VAT from 2021 when we've already paid it, feels unfathomable. I cannot believe that they would police this incident so heavy handedly and stop disbursements. If this drags on for months, we'd be forced to borrow just to cover our costs.

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VAT
By Jason Croke
03rd Feb 2024 17:16

Amazon are on the hook for all VAT on sales made by the trader unless Amazon has done its due diligence, so Amazon would rather lock out a few thousand traders who can't comply as its small fry loss of revenue compared to being on hook for several hundred thousand pounds worth of VAT from dodgy sales from Chinese scammers.

Amazon is a machine, they sell their own goods and goods by third party merchants, Amazon own this space totally, this is what happens when a dominant force has no competition that can come near to it.

If OP is an NETP then the VAT registration for the trader is not based on turnover of £85k but of Nil, as an NETP doesn't avail of the VAT threshold, which is why all the dodgy sellers do it using a virtual UK office to try and create a UK establishment and once again puts Amazon in the firing line, hence a very harsh approach by Amazon.

As I posted earlier, this is a new campaign , as HMRC have finally twigged the scam of using a virtual office to create a uK establishment.

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Replying to Jason Croke:
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By FactChecker
03rd Feb 2024 17:38

And, whilst resolving the situation will be uppermost in OP's mind, it may well be that the trigger lies in the passing comment:
"our VAT address / company registered address is different (also a UK address - we had issues with post at our warehouse because it was a new build, so we switched it to one of the directors mothers)."

This may well look like "a virtual office to create a UK establishment" to HMRC?

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Replying to FactChecker:
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By JungleC
04th Feb 2024 04:14

It's quite frustrating to potentially be considered as NETP when we've been VAT registered since 2018, with physical addresses in the UK consistent during this time period, plus both directors (up until 2022) living in the UK etc. We incorporated the company in the UK when both directors residence status reflected our countries of birth! We're both British, and the only change to these circumstances (which Amazon have always been aware of) over the last 5-6 years is one of our directors relocating abroad.

We have paid VAT on time, in every quarter since our registration. Our bookkeeper calculates it using our Sage account with all of our sales platforms feeding into it to aid the calculations.

Prior to 2021 and the change in e-commerce legislation for VAT collection, we paid it in the same way as we do now, so to have the threat of having it backdated is unfathomable.

We have a UK correspondence address and a warehouse in the same postcode. One of the directors uses the warehouse as the main place of work as it has an office, although most of the time he works from home in London. The correspondence address has always been consistent over the last 5-6 years and this is the company's registered address. It's one of the directors mothers house, and as it was close to our warehouse which we've rented now for over three years, it made sense for us to us to keep it this way. We didn't for one second think it would be an issue.

We didn't think to change the address because the warehouse was a new build when we started the contract, and we had issues with RM not being able to find the place!

To think that we could be considered non UK resident for VAT purposes makes me feel really uneasy. Are we considered to not be, just because one of our directors now lives in Portugal?

UK director, UK resident, UK warehouse and office address. 6 years of UK compliance for VAT......

It feels like a bad dream to be honest.

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Replying to JungleC:
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By FactChecker
04th Feb 2024 12:51

Whilst I understand your frustration, and sympathise with the apparent iniquity you are suffering, it won't help if you just keep repeating the same things over and over again like a mantra.

1. Forget the past (as in 'it's always been like this and we had no problems') - it's the present that matters. Things change (as they have done in your case) and with those changes there *may* be consequences.

2. So, as I tried to elicit before, how clear was the request from Amazon regarding what evidence they required? And have you clearly delivered to them documents that cover every single aspect?

3. What communication channel did they provide for returning that evidence to them? And what, if different, for any follow-up questions by either party?

Without meaning to sound patronising, you need to keep all the emotion out of this and concentrate on getting the facts straight and clear.
For instance, you now say: "The correspondence address has always been consistent over the last 5-6 years and this is the company's registered address. It's one of the directors mothers house";
whereas originally you said: "our VAT address / company registered address is different (also a UK address - we had issues with post at our warehouse because it was a new build, so we switched it to one of the directors mothers)"
Those don't appear to be the same thing ('always' vs 'switched')?

And as I pointed out before, the clock is ticking ever faster. You need to speak to a qualified adviser (and pronto because if Amazon start 'taking back VAT' from your account, then any resolution will get much harder).

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Replying to FactChecker:
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By JungleC
04th Feb 2024 15:28

I apologise if it sounds like a mantra, but we are merely trying to navigate unfamiliar territory, hence probably sounding somewhat disoriented to you. Managing a small business presents its own set of challenges, even without the added pressure of having to demonstrate our compliance with UK VAT regulations, NETP, or any other regulatory acronym. Up until this incident, we have diligently utilised all available resources to ensure our adherence to these standards as best as we can.

To the best of my knowledge, the clarity of Amazon's request regarding the specific evidence required was somewhat ambiguous. Despite this, I have made every effort to provide them with documentation that comprehensively addresses each aspect of their request.

The company registered address / VAT registration address / correspondence address, is one of the directors mother's houses, as it is within close proximity of the warehouse address which was acquired around 3 years ago when we needed storage space for the stock arriving from Asia. The reason for this was because we bootstrapped the business from nothing whilst we (the two directors) were travelling in Vietnam, working alongside rural farmers who hand-make the products that we sell, and this seemed like the best address to use at this particular point in time. This address has always been associated to the business for all correspondence. Perhaps we should have switched the registered address to the warehouse address, but we didn't, and the main reason for this was because of the postal issue I first alluded to.

I hope that clears that part up? Embarking on the journey of starting a business comes with the expectation of mastering every facet and excelling in all areas. Regrettably, we must admit that we have not reached this level of omnipotence. Nonetheless, we are committed to continuous learning and improvement. From humble beginnings, we have grown our business from nothing, to its current standing, and we take great pride in the progress we have made thus far despite not having all the answers for everything.

The original request was for:

1. Evidence of VAT Registration (If registered)
Provide evidence of your VAT registration number ensuring that:

the registered name in HMRC VRN Checker is associated with your registered name on Amazon; and
the registered address in HMRC VRN Checker is associated with your registered address on Amazon.
If this information is not aligned, it may not be accepted by Amazon. Work with your Tax Advisor to ensure this is updated correctly with the relevant tax authority.

If you are not required to be VAT registered in UK, please provide an explanation including any supporting evidence.

2. Evidence of physical operations at your stated UK business address
You must provide two documents, one from each category:

Category A
A recent UK council tax bill or business rates of the current year addressed to the company or a director/Partner of the company; or
A recent utility bill issued less than 180 days ago addressed to the company or a director/Partner of the company or; or
If you are using a shared working space, either your licence agreement, or copies of invoices for payment of rent, in the your name with the shared working space provider for a period of 6 months or longer.
Category B
A recent copy of an invoice addressed to the company as its primary place of business for goods or services that it has used to operate its business.

If the documents are issued in the name of the director/Partner, such director/Partner should be listed in UK Company House.
Documents for locations that are virtual offices or mail forwarding locations do not qualify as proof that you have UK primary place of business address. You will need to provide proof of a physical address.
3. Evidence of registration of your legal entity/partnership at the UK Company House
Provide an extract from your trade registry from UK Companies House which includes the following information:

Registered legal name;
Registered address; and
A list of all registered Directors of this legal entity.
If this information is not aligned with your Sell on Amazon account then it may not be accepted by Amazon. Work with your Tax Advisor to ensure this is updated correctly with the relevant authority or in Seller Central.

4. Proof of Identity and UK residence of the Directors / Partners (or similar)
Provide the following documentation to evidence the identity and UK residence of your directors/partners per the trade registry:

Proof of Identity
Full valid passport; or
Full valid driving licence.
Proof of Residence in the UK
Full UK photo card driving licence bearing residential address (if not already used as your proof of identity); or
UK council tax bill for the current year; or
Bill from utility company in the name of the director/partner, which is not older than 180 days; or
UK mortgage statement; or
TV licence letter or Direct Debit schedule. This should confirm the name, address and existence of TV licence; or
Electoral roll search in the name of the director/partner; or
Phone bill – landline only in the name of the director/partner, which is not older than 180 days.

If any of your directors does not reside in the UK, provide a written confirmation of this in your email. There is no requirement to provide documentary evidence.

5. Proof of Permanent Employment and UK Bank Account
If 50% or more of your Directors are non-UK residents then provide two documents, one from each category:

Category A
HMRC correspondence demonstrating the Selling Partner has registered with HMRC for PAYE, less than 180 days old; or
PAYE demand from HMRC or a screenshot of the PAYE return submission less than 180 days old, accompanied by pay slip less than 180 days old or P60 valid for the current year for the employee.
Category B
A statement from local bank account in the name of the company/partner/director, dated less than 90 days old.

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Amazon's latest request (today in fact), is now for the following:

"Thank you for providing your previous documents.
We require one or more additional documents to continue with your verification.

What documents should I provide?

-- An updated HMRC not older than 180 days
-- A copy of a full, valid passport or a valid national identity card of all directors
-- A copy of a full driving license of all directors

For more information on what documents are acceptable, go to "UK and EU VAT on E-commerce legislation:"
https://sellercentral-europe.amazon.com/help/hub/reference/GSF678GXLDTTTETZ

Thanks (1)
VAT
By Jason Croke
04th Feb 2024 18:01

I echo FactCheckers post.

Doesn't matter how compliant you have been, something isn't lining up with regard your business and it is spooking Amazon.

Either what you have sent will be sufficient and Amazon will reply positively or else they'll not....yes you are losing sales every day, Amazon aren't bothered, what are you going to do, sell directly on your own platform?

Nobody is suggesting you are doing anything illegal or dodgy, Amazon have flagged you for some reason, it'll likely be something to do with data held at Companies House (PSC, registered office) or something on your Amazon account (different address with Amazon than you have with companies house, etc) that has got Amazon knickers in a twist.

But you need to sort this with Amazon, not much else we can do here as it's a matter between you and Amazon.

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By JungleC
05th Feb 2024 03:28

Thanks for all of the helpful responses to my original question. I appreciate the help and assistance many of you have given us.

Seemingly it is an issue affecting multiple selling partners, so it's reassuring to know that we are not alone.

https://www.telegraph.co.uk/business/2024/02/04/amazon-told-government-u...

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Replying to JungleC:
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By FactChecker
05th Feb 2024 12:15

Whilst it may be comforting to realise that you're not being 'picked on' personally, it doesn't change the fact that Amazon has started their process - and will continue with it until that process reaches the end.

What you need to do is whatever is necessary to ensure that 'the end' equates to the result you want ... which, with the clock ticking, is why I recommended appointing an adviser to help you through it all.

In particular the lengthy list of items that they asked for (per your post above at 15:28 yesterday) suggests several items that you may have difficulty in providing - but should be treated as necessary (even if you have to do something first).
Your replies/actions will be checked by a machine with no leeway for human interpretation - so, for instance, the bit about "the registered address in HMRC VRN Checker is associated with your registered address on Amazon" means that these *must* both be the same address.
This forum cannot provide the certainties you need (anymore than you can publish confidential information here on a public forum), so please don't delay any more and seek out an adviser!

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By guhan123
08th Feb 2024 02:41

Hi. In my case, we have confirmed to Amazon that we are UK Non-Established as we are based outside the UK. This would mean we need to make a reversal of all VAT paid and I have checked online and found that we can apply for a VAT reversal for upto 4 years.

Now my questions are,

1. Can I file for a VAT reversal immediately in the upcoming VAT filing?

For eg. I paid 6000£ in VAT last quarter - So technically I need to apply for (6000£ & the supplier VAT deductions I made?)

If you are an expert, please share your email ID, I would like to request your services.

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By JohnF3030
21st Feb 2024 19:13

Hey Chris,

I am just going through the same process. All our business is conducted in the UK from top to bottom, however both myself and my wife decided to move to France a few years ago. We've had 2 notifications from Amazon. The first states we are not based in France and the second states we are not based in the UK. along with a tax demand of 92K. The 92K has already been submitted directly to the UK authorities as VAT as per guidance from Avalara - our tax agent (AN AMAZON COMPANY). All accounts are frozen. I shall ask the HMRC what to do but I don't see that they'll be too happy about thousands of cases where companies are asking for their VAT payments back in order to pay it to Amazon so that Amazon can then pay it to them! I'd rather wind my company up than go through the months of pain this'll cause. I'll post any updates. I'd be grateful if others could do the same if they find some resolution.

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Replying to JohnF3030:
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By FactChecker
21st Feb 2024 20:48

Chris? Who is Chris?

And good luck with whatever you're doing (it's not clear is an under statement).

"We've had 2 notifications from Amazon. The first states we are not based in France and the second states we are not based in the UK. along with a tax demand of 92K".
Are you suggesting that Amazon, instead of HMRC, is issuing tax demands?

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Replying to FactChecker:
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By JohnF3030
18th Mar 2024 17:33

I must have seen a Chris on the thread somewhere - sorry!

Just to update. Central to the problem is that Amazon are sending me conflicting statements, ie we apparently are not established in England OR in France (they've done this twice now). They also refuse to answer our requests for the detail behind the 92K demand (which we would need for the HMRC reclaim I guess). There is no possibility of me managing my way out of this without this clarity. Absolute horror show in my opinion. All VAT is up to date - just been paid directly to the HMRC in accordance with Avalara who are the Amazon vat compliance team. I've pretty much given up mailing them or expecting this to have a good outcome. Did anybody else manage to get this resolved?

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Replying to JohnF3030:
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By Lionche
02nd Apr 2024 13:33

Hello, this indeed sounds like a ****show, we have received a number of emails from Amazon asking the same proof etc... Like you we are living in France running a UK business, registered for VAT in the UK, all payments are up to date.

Did you manage to resolve this with Amazon/HMRC? I would be so grateful if you could take the time to update this thread, all the best, Lionel

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