Key takeaways
- Amazon has collected £6 billion in VAT revenue from overseas sellers for the UK Government since 2021.
- We continue to invest heavily in technology and compliance systems to support effective VAT collection.
- Amazon supports reform of current VAT Deemed Reseller rules that require online marketplaces to collect VAT on all sales, regardless of where they are based, to create a level playing field and simplify compliance.
Small businesses are the backbone of the UK economy, and we are proud to provide them with the tools, technology, and opportunities they need to succeed.
Through the Amazon store, we help more than 100,000 UK small and medium-sized enterprises (SMEs) digitise their operations, reach new customers, and grow their sales both domestically and internationally.
Last year, UK-based SMEs selling on Amazon achieved £3.8 billion in export sales.
Amazon is committed to ensuring fair and transparent VAT compliance by independent sellers in the UK and globally. Since 2021, Amazon has been required, under “Deemed Reseller” rules, to collect VAT on behalf of overseas sellers trading on our UK store, while UK-based sellers are responsible for paying VAT directly to HMRC. These rules apply to all online marketplaces. To date, Amazon has collected over £6 billion in VAT revenue for the UK Government.
However, under the current regulations, honest sellers are left confused and unduly burdened by the due diligence checks online marketplaces like Amazon are required to carry out to determine establishment, while bad actors are seeking to exploit gaps in the law by falsely registering their companies in the UK.
Independent analysis commissioned by Amazon estimates that up to £3.2 billion of sales across all online marketplaces in the UK each year are made by bad actors who avoid VAT collection due to methods such as claiming to be UK established.
Since Deemed Reseller rules were introduced in 2021, we have seen more sophisticated forms of fraud emerge – including the use of shell companies, falsified documents, and a cottage industry built around circumventing the current regime.
Despite measures by the Government and online marketplaces’ strong controls, these evolving tactics are making it increasingly difficult to detect and prevent fraud.
We carry out extensive work to protect honest businesses by detecting those falsifying where they are established. We invest significant resources in advanced data analytics, verification tools, expert compliance teams to detect and prevent abuse, and robust systems and processes to ensure effective VAT collection.
This involves hundreds of employees working closely with HMRC and other enforcement authorities to strengthen VAT compliance by conducting place of establishment checks using seller outreach, internal Amazon data, and information in public databases, including VAT registration numbers, company names, and directors’ addresses.
We believe reform of the Deemed Reseller rules are needed. The UK’s National Audit Office and Public Accounts Committee have both identified opportunities to strengthen VAT collection in online retail more broadly by integrating company and tax registration systems. However, the Committee recently said these efforts could take 5-10 years to implement, and noted this is too long.
Amazon would like to see changes now. Specifically, we believe that extending Deemed Reseller rules to apply to all sellers – whether they are based in the UK or overseas – will immediately close this loophole, raise up to £700 million a year for the Exchequer, and create a fairer environment for compliant UK small businesses. This approach would streamline VAT collection for HMRC and reduce administrative burdens for both authorities and legitimate sellers.
Similar frameworks are already in place in countries such as Switzerland and are being considered by the European Commission. Encouragingly, the UK Government has already launched a review of these rules, and with the forthcoming Autumn Budget, now is the time to strengthen existing measures.
Amazon is actively partnering with HMRC and the UK Government to share operational learnings and best practices. We will continue to invest in the technology and enforcement to hold bad actors accountable, and to protect customers, compliant sellers, and public revenues from VAT fraud.
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