Ecommerce Finance

Accounts and tax for UK Amazon FBA and FBM sellers.

Amazon sellers carry accounting complexity that general accountants rarely encounter: settlement payouts mix gross sales, FBA fees, referral fees, advertising costs and reimbursements into a single net deposit that bears no direct relation to taxable revenue. <a href="/vat/vat-on-marketplace-fees">VAT on Amazon's fees</a> follows reverse-charge rules under <a href="https://www.gov.uk/guidance/vat-place-of-supply-of-services-notice-741a">Notice 741A</a>, and that fee value counts toward the <a href="https://www.gov.uk/vat-registration">£90,000 VAT registration threshold</a>. Pan-EU FBA stock creates multi-jurisdiction registration questions the UK return does not resolve. We work with FBA and FBM sellers on the full picture: settlement reconciliation, <a href="/services/ecommerce-vat-compliance">VAT compliance</a>, <a href="/services/selling-into-the-eu">pan-EU obligations</a> and annual accounts.

What makes amazon sellers finance different.

Settlement reports do not equal taxable revenue

Amazon settles fortnightly with a net payout that mixes gross sales, FBA fulfilment fees, referral fees, advertising costs, reimbursements and loan repayments. Reconciling this back to the VAT-inclusive gross sales figure your VAT return requires, and the cost-of-goods figure your income tax return requires, is the core bookkeeping challenge for Amazon sellers. See our <a href="/services/settlement-payout-reconciliation">settlement reconciliation service</a> and the <a href="/research/online-seller-index">Online Seller Index</a> for the most common reconciliation gaps we find.

VAT on Amazon fees: the reverse-charge principle

Where Amazon's marketplace and advertising fees are billed from an overseas entity, they are reverse-charge services under <a href="https://www.gov.uk/guidance/vat-place-of-supply-of-services-notice-741a">HMRC Notice 741A</a>. You self-account for UK VAT on those fees on your own VAT return. Critically, the value of those reverse-charge services counts toward your <a href="https://www.gov.uk/vat-registration">£90,000 registration threshold</a>, so a seller buying large volumes of Amazon advertising can hit registration obligations before their gross product sales reach £90,000. Details at <a href="/vat/vat-on-marketplace-fees">/vat/vat-on-marketplace-fees</a>.

Pan-EU FBA stock and multi-jurisdiction VAT

FBA inventory distributed across Amazon's European fulfilment network creates potential VAT registration obligations in each country where stock is held. The EU OSS scheme does not cover goods already stored in an EU member state. UK sellers using pan-EU distribution need a registration strategy, not an assumption that UK VAT registration covers everything. Route to <a href="/services/selling-into-the-eu">Selling into the EU</a> and <a href="/vat/ioss-vs-oss">/vat/ioss-vs-oss</a> for cross-border scheme options; <a href="/vat/deemed-supplier-establishment">/vat/deemed-supplier-establishment</a> covers how <a href="https://www.gov.uk/guidance/vat-and-overseas-goods-sold-to-customers-in-the-uk-using-online-marketplaces">establishment status</a> changes the VAT picture.

COGS and inventory accounting for accurate profit figures

Amazon sellers with significant stock positions frequently find that profit in their accounts does not match their bank balance. The gap is usually unrecognised cost of goods sold, prepaid inventory, or FBA fees netted from payouts rather than recognised as expenses. Under <a href="https://www.gov.uk/hmrc-internal-manuals/business-income-manual/bim33115">BIM33115</a>, closing stock is valued at the lower of cost and net realisable value. Accruals-basis accounts with a proper stock valuation give a reliable profit figure for tax planning. You can also use <a href="/vat/postponed-vat-margin-scheme">postponed VAT accounting</a> on stock imports to avoid a border VAT cash outflow. See also <a href="/blog/bookkeeping-and-inventory/cogs-inventory-basics">COGS and inventory basics</a>.

How we help amazon sellers.

Settlement reconciliation and bookkeeping

We reconcile Amazon settlement reports back to gross sales, separate fee categories and produce monthly accounts showing true trading profit rather than net payout. This feeds your VAT return, income tax return and management reporting. Details at <a href="/services/settlement-payout-reconciliation">settlement and payout reconciliation</a>.

VAT compliance and pan-EU registration strategy

We handle UK VAT returns for Amazon sellers, advise on the reverse-charge treatment for marketplace and advertising fees under <a href="https://www.gov.uk/guidance/vat-place-of-supply-of-services-notice-741a">Notice 741A</a>, and assess pan-EU registration obligations for FBA sellers distributing stock across multiple countries. Route to <a href="/services/ecommerce-vat-compliance">ecommerce VAT compliance</a> and <a href="/services/selling-into-the-eu">selling into the EU</a>.

Annual accounts and tax returns for seller businesses

We prepare sole-trader <a href="https://www.gov.uk/register-for-self-assessment">Self Assessment</a> returns and limited company accounts for Amazon selling businesses, with COGS and inventory properly recognised and owner extraction structured against current rates. Use our <a href="/calculators/sole-trader-vs-ltd-sellers">sole trader vs limited company calculator</a> and <a href="/calculators/seller-take-home">seller take-home calculator</a> to model the options. Generic incorporation and salary/dividend mechanics: <a href="https://hollowaydavies.co.uk">hollowaydavies.co.uk</a>.

Common questions

Do I pay VAT on Amazon's FBA and advertising fees?

Where Amazon's fees are billed from an overseas entity, they are reverse-charge services under <a href="https://www.gov.uk/guidance/vat-place-of-supply-of-services-notice-741a">Notice 741A</a>: you self-account for UK VAT on your own VAT return. The value of those fees also counts toward your <a href="https://www.gov.uk/vat-registration">£90,000 registration threshold</a>. Sellers not registered for VAT cannot reclaim the input VAT. See <a href="/vat/vat-on-marketplace-fees">/vat/vat-on-marketplace-fees</a> for the full analysis.

How do I work out my taxable revenue from Amazon settlement reports?

Settlement payouts are net figures after fees, advertising and reimbursements. Taxable revenue for VAT and income tax purposes is the gross selling price before Amazon deducts anything. You need to reconcile each settlement report back to gross sales, then account for fees as separate business expenses. See <a href="/blog/vat-and-cross-border-selling/vat-threshold-gross-vs-payout">VAT threshold: gross vs payout</a> and our <a href="/services/settlement-payout-reconciliation">settlement reconciliation service</a>.

Is my VAT threshold based on gross Amazon sales or my payout?

<a href="https://www.gov.uk/vat-registration">VAT registration</a> is compulsory once taxable turnover exceeds £90,000 in any rolling 12-month period. For Amazon sellers "turnover" is gross sales (the price the customer paid), not the net payout after Amazon deducts its fees. Watching your bank deposits to track your VAT threshold will systematically under-count. Use our <a href="/calculators/vat-threshold-tracker">VAT threshold tracker</a>.

Do I need to register for VAT in EU countries if I use FBA pan-EU?

Potentially yes. If Amazon stores your inventory in an EU country's fulfilment centre, you may have a VAT registration obligation in that country. The EU OSS scheme covers distance sales but not goods already held in EU stock locations. See <a href="/services/selling-into-the-eu">Selling into the EU</a> and <a href="/vat/ioss-vs-oss">/vat/ioss-vs-oss</a>. <a href="https://www.gov.uk/guidance/vat-and-overseas-goods-sold-to-customers-in-the-uk-using-online-marketplaces">Non-UK-established sellers</a> have no UK VAT registration threshold; the marketplace accounts for UK VAT on their behalf.

Can I use postponed VAT accounting on stock I import for FBA?

Yes. <a href="https://www.gov.uk/guidance/check-when-you-can-account-for-import-vat-on-your-vat-return">Postponed VAT accounting</a> lets a VAT-registered importer account for import VAT on the same VAT return rather than paying it at the border and reclaiming later. For FBA sellers importing stock this removes a border VAT cash outflow and is the standard approach. See <a href="/vat/postponed-vat-margin-scheme">/vat/postponed-vat-margin-scheme</a>.

Can HMRC see my Amazon sales?

Yes. <a href="https://www.gov.uk/guidance/reporting-rules-for-digital-platforms">Digital platform reporting rules</a> took effect from 1 January 2024, with first reports covering 2024 due in January 2025. Amazon and other platforms report seller income directly to HMRC. The assumption that marketplace sales are invisible to HMRC is no longer valid. See <a href="/blog/platform-reporting-and-hmrc-letters/platform-reporting-rules">platform reporting explained</a> and our <a href="/services/hmrc-letter-online-sales">HMRC letter response service</a>.