***DISCLAIMER***

The team at Link My Books are happy to provide users with technical assistance in applying tax rules to their Link My Books setup. We are not Tax Advisors and so our advice and suggestions on the application of tax rules cannot be construed as tax advice. We highly recommend that users seek advice from qualified accountants for their tax compliance.

Who is this article for?

Post-Brexit" refers to the end of the Brexit transition period on 31/12/2020 at 11 pm UK time. That is when the UK formally left the customs union and became a "3rd country" in the eyes of the EU.

But what does it mean for UK businesses that are still trading in the EU? How are figures affected on the VAT return post Brexit?

Even if you are no longer selling into the EU, this article will still help you understand what figures go where on the UK VAT return and how to choose the correct tax rates for your business.

This entire article is written from the perspective of a UK business submitting a UK VAT return for a period after the Brexit transition period ended.

For Pre-Brexit, see this article.

You can also read about what should be included in the UK VAT Return here – an article written from the perspective of a UK business submitting a UK VAT return for a period before the Brexit transition period ended.

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What makes up a UK VAT return?

The UK VAT return is made up of 9 boxes:

VAT due in the period on sales and other outputs
VAT due in the period on acquisitions of goods made in Northern Ireland from EU Member States
Total VAT due
VAT reclaimed in the period on purchases and other inputs (including acquisitions from the EU)
Net VAT to pay to HMRC or reclaim
Total value of sales and all other outputs excluding any VAT
The total value of purchases and all other inputs excluding any VAT
Total value of all supplies of goods and related costs, excluding any VAT, to EU member states
Total value of all acquisitions of goods and related costs, excluding any VAT, from EU member states

For a full guide on what each box entails, please review the HMRC Guidance here.

Your accounting platform, such as Xero or QuickBooks, will automatically sort your bookkeeping figures into the above 9 boxes based on the tax rates you apply when entering data into them.

It is important that you correctly segregate your sales and fees and account for them accurately using the correct tax rates so that Xero or QuickBooks can place the figures in the right boxes of your VAT return.

What tax rates should I use for my sales income?

The tax rates for sales income is an area where post-Brexit things actually became a little easier.

In terms of what tax rates to use, whilst we can't give you specific advice, we can tell you what most of our users choose (including our e-commerce accountant customers with several hundred clients).

Firstly, you need to break your Amazon sales down into the following 4 groups (Link My Books does this for you automatically):

Sales shipped to UK - Seller Responsible for VAT (Post-Brexit)
Sales shipped to UK - Marketplace Responsible for VAT (Post-Brexit)
Sales shipped outside UK - dispatched from GB (Post-Brexit)
Sales shipped outside UK - dispatched from outside GB (Post-Brexit)

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Sales shipped to UK - Seller Responsible for VAT (Post-Brexit)

Sales which have been delivered to customers located in the United Kingdom with a tax point after 31/12/2020 where the seller is responsible for collecting and remitting UK VAT.

Sales to this group usually incur the tax rate:

Xero - 20% (VAT on Income)

QuickBooks - 20.0% S (Standard 20%)

Sales shipped to UK - Marketplace Responsible for VAT (Post-Brexit)

Sales which have been delivered to customers located in the United Kingdom with a tax point after 31/12/2020 where the marketplace is responsible for collecting and remitting UK VAT.

Sales to this group usually incur the tax rate:

Xero - Zero Rated Income

QuickBooks - 0.0% Z (Zero-Rated 0%)

Amazon (and other Online Marketplaces like eBay) started collecting and remitting UK VAT on sales from 01/01/21, which are:

a) delivered to UK customers from outside the UK with a value of up to £135 or;

b) delivered to UK customers from the UK, where the seller is not a UK business.

Sources: Amazon Guidance & HMRC Guidance

Sales shipped outside UK - dispatched from GB (Post-Brexit)

Sales which have been delivered to customers located outside the United Kingdom which have been dispatched from inventory held in Great Britain with a tax point after 31/12/2020.

Sales to this group usually incur the tax rate:

Xero - Zero Rated Income

QuickBooks - 0.0% Z (Zero-Rated 0%)

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Sales shipped outside UK - dispatched from outside GB (Post-Brexit)

Sales which have been delivered to customers located outside the United Kingdom, which have been dispatched from inventory held outside Great Britain with a tax point after 31/12/2020.

Sales to this group usually incur the tax rate:

Xero - No VAT

QuickBooks - No VAT (No VAT Applicable 0%)

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What tax rates should I use for my Amazon fees?

The rate of VAT Amazon charges on their various types of fees differs depending on whether you have entered your VAT number into Seller Central or not.

If you have entered your VAT number into Amazon Seller Central, then your tax rates on Amazon fees usually look like this:

Amazon Seller Fees (Merchant VAT Invoice):

Xero - Reverse Charge Expenses (20%)

QuickBooks - 20.0% RC SG (Reverse Charge Services 20%)

Amazon FBA Fees (Fulfilment by Amazon Tax Invoice):

Xero - Reverse Charge Expenses (20%)

QuickBooks - 20.0% RC SG (Reverse Charge Services 20%)

All Marketplaces except UK Advertising Fees (Product Ads VAT Invoice):

Xero - Reverse Charge Expenses (20%)

QuickBooks - 20.0% RC SG (Reverse Charge Services 20%)

Amazon.co.uk Advertising Fees (Product Ads VAT Invoice):

Xero - 20% (VAT on Expenses)

QuickBooks - 20.0% S (Standard 20%)

If you have not entered your VAT number on Amazon Seller Central, then they will be applying VAT to all of your fees, so your tax rates would be:

Xero - 20% (VAT on Expenses)

QuickBooks - 20.0% S (Standard 20%)

You can double check the above and confirm that the above tax rates are correct by navigating to:

Reports > Tax Document Library > Seller Fee Invoices

The above page in Seller Central looks like this:

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In the above screenshot, you will see that this example seller has entered their VAT number into seller central as it appears in the "Payer Registration" column.

You will also notice that the Fulfilment by Amazon Tax Invoices, Merchant VAT Invoices and Product Ads VAT Invoice for non Amazon.co.uk marketplaces are all invoiced from the supplier name "Amazon Services Europe S.a.r.L." with a Luxembourg VAT number.

This is why all these fees usually incur the Reverse Charge Expenses (20%) tax rate as they are B2B Purchase of Services.

The Amazon.co.uk Product Ads VAT Invoice is however invoiced from Amazon Online UK Limited with a UK VAT number and therefore includes VAT at 20%, hence why these fees usually incur the 20% (VAT on Expenses) tax rate.

If you have not entered your VAT number into seller central, it won’t appear in the "Payer Registration" column, and therefore Amazon cannot deem their fees as B2B Supply of Services from their end and will be forced instead to charge UK VAT on all of your fees.

What about other income and reserved balances etc.?

Amazon settlements can often contain a vast array of transaction types which won't always fit into "Sales" or "Fees" groups.

Link My Books separates those transactions out into the following groups:

Amazon FBA Reimbursements
Amazon Loans
Amazon Reserved Balances

Amazon FBA Reimbursements

When Amazon damages or loses your inventory that is stored at their FBA warehouses, they often reimburse you financially.

Since these amounts are paid net of any VAT and are, in theory, the same as an insurance payout, most sellers will apply the following tax rate:

Xero - No VAT

QuickBooks - No VAT (No VAT Applicable 0%)

Amazon Loans

Once you have been selling on Amazon for at least 12 months, they may offer you a loan to help you grow your business.

If you take a loan from Amazon, they add the loaned funds to your next payout, and that detail then appears in your settlements that Link My Books imports.

Since loans are outside the scope of VAT, they usually incur the tax rate:

Xero - No VAT

QuickBooks - No VAT (No VAT Applicable 0%)

Amazon Reserved Balances

We use the Amazon Reserved balances category for two main things:

Money reserved by Amazon for future payout
Split month settlement rollover balances

Both of these are also outside the scope of VAT and therefore usually incur the tax rate:

Xero - No VAT

QuickBooks - No VAT (No VAT Applicable 0%)

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What if I sell Zero Rated or Reduced Rated goods?

If you sell a mixture of standard, zero and reduced rated goods, then you will need to further split your sales income in the Sales shipped to UK - Seller Responsible for VAT (Post-Brexit) group into:

Standard Rated Goods
Zero Rated Goods
Reduced Rated Goods

When setting up Link My Books, you will be prompted to let us know if you sell any zero or reduced rated goods, and if you do, we will set up separate product groups for those.

You can then assign your products to the correct groups, and we will apply your chosen tax rates to each group.

See our article on product groups for more information on this.

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Can Link My Books help me automate VAT returns?

Yes! 🙌

Link My Books hooks up directly to your Amazon seller central account and your Xero or QuickBooks account. Each time you receive a payout from Amazon, we automatically download the data, check each and every transaction that makes up that payout and correctly group them.

Link My books ensures that you accurately account for all your Amazon sales, refunds, fees, and VAT by breaking down each payout and creating a summary invoice to be sent to your accounting platform.

Not only does this save you countless hours versus doing it all manually, but most sellers actually see an increase in accuracy and therefore a reduction in previously overpaid VAT by separating out all of the sales revenue that should not incur 20% VAT.

Start a 14-day free trial of Link My Books today and see just how much time and money you could save when you automate your Amazon accounting and your VAT returns.

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Do I have to file a VAT return when selling on Amazon?

In the UK, every VAT-registered person has to file a VAT return. VAT filing means submitting reports to the tax authorities to give them information about your transactions and the amount of VAT you need to pay or receive.

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How often do you need to file VAT returns as an Amazon seller?

Each country has its own rules around how often you should submit a VAT return. In the UK, VAT returns can be submitted monthly or quarterly, with most returns completed quarterly.

When your VAT liability exceeds £2.3 million, the VAT return must be submitted monthly. If the taxable turnover is less than £1.35 million, you can request to file returns annually.

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Once I’ve submitted the VAT return, how long do I have to pay?

In the UK, payment for monthly or quarterly VAT returns is required within one calendar month and seven days from the end of the VAT period.

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Do I need to think of anything else?

VAT is complicated. This is just a brief overview and only from the UK VAT perspective.

It's always a good idea to speak with your accountant for all things VAT, so involve them when you are setting up Link My Books, and if you are and they have any questions, don't hesitate to get in touch with our support team.

You can reach the support team via the blue message icon at the bottom of any page or by email via support@linkmybooks.com

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