AMAZON VAT RULES FROM 1ST AUGUST 2024 - ARE YOU STILL CONFUSED - PLEASE READ THIS EXAMPLE!
Amazon sellers needs to pay VAT on Sales Price Including, referral fee, storage, FBA fulfilment, ads, etc. which is inclusive of 20% VAT for customers so the Formula for calculate VAT will be TOTAL SALES /6 = PAYABLE VAT
For example: Total Quarterly sales is £20k / 6 = £3333.33 (payable VAT)
The reason we are dividing by 6 because our selling price is inclusive of 20% VAT on Amazon and we don't need to pay VAT on Inclusive VAT. So we will deduct VAT from our sale price to get actual selling price Exclusive VAT and will pay 20% VAT on that price.
For example.
We sell item for £10 inclusive 20% VAT. So the item price VAT is £10 /6 = £1.66
This £1.66 is the VAT included in £10 selling price. This is the actual VAT we need to pay to HMRC for each item.
So your selling price is £10- £1.66 = £8.34 ( your actual selling price without VAT) so you need to pay 20% vat on 8.34 which is £1.66. And Sale Price 8.34+ (20% VAT )1.66 = 10 (sale price inclusive VAT)
How to Claim back the VAT
When you Submit VAT then every quater your accountant will find a difference of payable VAT to HMRC and let you know how much you owe.
For Example: your Quarterly sales is £20k on Amazon only and you are only doing business on Amazon. Then your 20% VAT will be £4000.
But you need to minus already Paid VAT on purchases and paid to Amazon on fees and Ads. Which is may be £2000.
Then £4000 - £2000 = £2000 is payable VAT difference to HMRC you have to pay.
Sometimes you Paid more VAT already on purchases and Amazon fees ads then you Claim that VAT back from HMRC.
Like if your VAT is £4000 on £20k sales but have made Big purchases for a season stock and already paid £6000 VAT then HMRC will return your £2000 VAT back for that quarter because you have already paid excess VAT but that can only be prove with Genuine purchase invoices or Amazon Tax invoices.
