This article is written form the prospective of a UK based business who's home country for VAT purposes is the UK and who is using the destination based approach for VAT.
It is also assumed that the business holds VAT registrations in all countries where it stores inventory.
You should always speak to your accountant or tax advisor to ensure that you are getting your VAT returns correct.
This entire article is written from the prospective of a UK business submitting a UK VAT return for a period before the Brexit transition period ended.
For Post-Brexit see this article.
***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.
Sales Figures:
UK Tax Jurisdiction Sales:
Sales that are either delivered to UK customers,
or
Sales that are delivered to EU customers in countries where you DON’T hold a VAT registration AND are dispatched from the UK,
or
Sales that are delivered to EU customers in countries where you DON’T hold a VAT registration AND are dispatched from an EU country where you DON’T hold a VAT registration.
UK Tax Jurisdiction Sales would usually incur the following tax rate:
Xero - 20% (VAT on Income)
QuickBooks - 20.0% S (Standard 20%)
Using the above tax rates means that the following will be recorded on the VAT return:
VAT at 20% to Box 1, Net Sale to Box 6
EU Tax Jurisdiction Sales - Dispatched from the UK
Sales that are delivered to EU customers in countries where you DO hold a VAT registration AND are dispatched from the UK.
EU Tax Jurisdiction Sales - Dispatched from the UK would usually incur the following tax rate:
Xero - Zero Rated Income
QuickBooks - 0.0% Z (Zero-Rated 0%)
Using the above tax rates means that the following will be recorded on the VAT return:
VAT at 0% to Box 1, Net Sale to Box 6
Zero Rated EC Business Sales - Dispatched from the UK*
Sales that are delivered to EU business customers that are VAT registered in other EC states AND are dispatched from the UK.
Zero Rated EC Business Sales - Dispatched from the UK would usually incur the following tax rate:
Xero - Zero Rated Income
QuickBooks - 0.0% Z (Zero-Rated 0%)
Using the above tax rates means that the following will be recorded on the VAT return:
VAT at 0% to Box 1, Net Sale to Box 6
* For these sales you will also need to take a look at our article on EC Sales.
Sales Exported Outside the EU - Dispatched from the UK
Sales that are delivered to customers outside the EU AND are dispatched from the UK.
Sales Exported Outside the EU - Dispatched from the UK would usually incur the following tax rate:
Xero - Zero Rated Income
QuickBooks - 0.0% Z (Zero-Rated 0%)
Using the above tax rates means that the following will be recorded on the VAT return:
VAT at 0% to Box 1, Net Sale to Box 6
Amazon Fees:
The rate of VAT Amazon charges on their various types of fees differs depending on if you have entered your VAT number into Seller Central or not. In addition to the standard fees.
Sellers should also be aware of the Amazon exchange rate guarantee fee, particularly if they are selling in multiple currencies. This fee is applied to protect against fluctuations in exchange rates and can impact your overall costs and VAT calculations.
If you have entered your VAT number into Amazon Seller Central then your tax rates on Amazon fees should 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%)
Using the above tax rates means that the following will be recorded on the VAT return:
+/- VAT at 20% to Box 1 & 4,
+/- Net Purchase to Box 6 & 7
Amazon.co.uk Advertising Fees (Product Ads VAT Invoice):
Xero - 20% (VAT on Expenses)
QuickBooks - 20.0% S (Standard 20%)
Using the above tax rates means that the following will be recorded on the VAT return:
VAT at 20% to Box 4
Net Purchase to Box 7
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%)
Using the above tax rates means that the following will be recorded on the VAT return:
VAT at 20% to Box 4
Net Purchase to Box 7
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:
In the above screenshot you will see that the 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 these fees all use the Reverse Charge Expenses (20%) tax rate as they are Intra EU 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 use 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 Intra EU B2B Supply of Services from their end and will be forced instead to charge UK VAT on all of your fees.
EC Inventory Movement
You also need to take into account any EC fulfilment transfers made. These would also need to be recorded as follows.
(This only applies if Amazon is transferring inventory between EU fulfilment centres on your behalf through either their PAN EU program or by allowing them to store your inventory in other countries)
Goods imported to the UK from one of your other EU VAT registered countries
These are classed as Intra EU B2B Purchase of Goods (even though the two business are really just your one business with two different VAT numbers). The total cost price amount of any transfers of inventory from EU fulfilment centres to UK fulfilment centres should be included in this section.
These would usually incur the following tax rate:
Xero - EC Acquisitions (20%)
QuickBooks - 20% ECG (EC Goods Standard)
Using the above tax rates means that the following will be recorded on the VAT return:
+/- VAT at 20% to Box 2 and 4, +/- Net Purchase to Box 7 and 9
Goods exported from the UK to one of your other EU VAT registered countries
These are classed as Intra EU B2B Supply of Goods (even though the two business are really just your one business with two different VAT numbers). The total cost price amount of any transfers of inventory from UK fulfilment centres to other EU fulfilment centres should be included in this section.
These would usually incur the following tax rate:
Xero - Zero Rated EC Goods Income
QuickBooks - 0.0% ECG (EC Goods Zero-rated 0%)
Using the above tax rates means that the following will be recorded on the VAT return:
Net Sale to Box 6 & 8
How often do you need to file VAT returns?
In the UK, VAT returns can be submitted monthly or quarterly, with most returns completed quarterly.
When if your VAT liability exceeds £2.3 million, the VAT return needs to be submitted monthly. Conversely, if the taxable turnover is less than £1.35 million, you can request to file returns annually.
How long do I have to pay the bill once the VAT return has been submitted?
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.
Does Link My Books help with VAT returns?
The short answer is yes for all sales data and a partial yes for the EC Sales & Inventory movements.
Link My Books imports the data required to work out all of the above from Amazon as long as you have opted for the Tax Jurisdiction Grouping.
You can turn on Tax Jurisdiction Grouping from the Settlement Settings page.
This setting means that Link My Books will use the data from the Amazon VAT Transactions Report to correctly group your sales/refunds by tax jurisdiction.
This information helps us to generate your settlements ready to send over to Xero or QuickBooks.
We also use the VAT Transactions Report to generate your EC Inventory movement and EC Sales List.
Currently the EC Sales and Inventory Movements are displayed on the EC Sales & EC Movements page for information only - we do not send any of this data to Xero or QuickBooks.
You can learn more about the actions you need to take for your EC Sales & Movements in this article.
If you are an Amazon seller that’s tried to handle VAT returns by yourself, give Link My Books a go and see how much easier submitting VAT returns is.
You can start your free Link My Books trial today!
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