New to LTDCo - Amazon Business/VAT query

[sparkyjf]

Hi all,

Please bear with me as I'm brand new to all this and still learning a lot. I've asked a lot of questions of my accountant, but I found this forum whilst searching various things of interest, and thought it looked like an excellent resource.

I've set up my first ever limited company, VAT registered (not flat rate), and currently working an outside IR35 contract. I signed up for an Amazon Business account (for no better reason than that I could!) and added my VAT number to it. What intrigues me is that Amazon Business seem to be charging me the ex-VAT amount on my credit card when I make purchases. I'm entering these charges into the accounting system with 0% VAT as advised by my accountant, but I'm really curious about how it all works.

For example, how do Amazon know that I've earned enough money (which naturally I'll have charged VAT on) to be able to reclaim VAT on a specific purchase? Do they report purchases to the HMRC which would be tallied up (e.g. in an audit situation)? Do I have any legal requirements to declare my VAT free purchases from Amazon Business to the HMRC (other than sharing the 0% VAT rated invoices)?

It strikes me that the way this seems to work, I could do all my personal shopping on Amazon Business and pay the ex-VAT prices, but obviously I have no desire to store up problems for the future and am certainly not going to do that - I'm just starting out and want to do so on the right foot! I asked my accountant these questions but didn't really understand the answer - please forgive me if I'm being dense - I just hoped that someone here could explain it to me in "laymans terms"!

Thanks in advance!

[Lance]

Oh dear.....

Don’t mix personal and business finances.....

The VAT is not being charged as you’ve provided the VAT number and Amazon are using EU rules to not charge it.
YOU CANNOT RECLAIM VAT THAT HAS NOT BEEN PAID.

Not paying VAT on personal purchases is VAT fraud. You can go to prison for that.
Even thought the VAT people have merged with the income tax people it doesn’t mean they have suddenly become as nice as them income tax people.

DONT **** THE VAT MAN.


FOG.

[lecyclist]

Statistically, you are unlikely to be investigated. However, should you be investigated by HMRC, they would likely view frequent purchases in this way as a sign of systematic abuse.

Consider your appetite for risk before continuing.

[sparkyjf]

Thank you both for your prompt replies - to reassure everyone, I have no intention of committing VAT fraud or otherwise doing something that could result in prison/fines/whatever further down the road, nor have I done so so far. In fact, I think my accountant is getting fed up with me bugging him with my questions over my purchases, categorisation in FreeAgent, and so on. I'm a big believer that knowledge is power, but that doesn't mean I want to abuse it

I suppose I was simply fascinated to learn that it's possible to buy things ex-VAT - I had no idea this was even a thing, though I've known for years that you could claim VAT back in appropriate circumstances.

My accountant mentioned EU rules when I brought up the topic with him - is this something that will change now that we're post-Brexit?

Thanks again for your help!

[northernladuk]

. I signed up for an Amazon Business account ( for no better reason than that I could !)

Stop doing silly things like this until you have a clue about what you are doing.

[TheCyclingProgrammer]

Firstly, don’t use your business account to make personal purchases. Keep business and personal separate.

I too have an Amazon business account but it’s very unusual to be charged ex VAT. Amazon UK are a UK VAT registered business and whilst the business site shows prices ex VAT you should still be getting charged VAT.

I would only expect your purchases to be zero rated if they are being purchased from an EU based seller however you would still pay VAT on these purchases as they would go on your VAT return as acquisitions (this is similar to, but not quite the same as the reverse charge for services). You are using a UK delivery address I assume?

I suggest you check your invoices but something is not right here.

[sparkyjf]

Firstly, don’t use your business account to make personal purchases. Keep business and personal separate.

I too have an Amazon business account but it’s very unusual to be charged ex VAT. Amazon UK are a UK VAT registered business and whilst the business site shows prices ex VAT you should still be getting charged VAT.

I would only expect your purchases to be zero rated if they are being purchased from an EU based seller however you would still pay VAT on these purchases as they would go on your VAT return as acquisitions (this is similar to, but not quite the same as the reverse charge for services). You are using a UK delivery address I assume?

I suggest you check your invoices but something is not right here.

I totally agree with you - this is why I'm seeking support. That was my point in my original post I suppose - I learn very much by doing and as with yourself, have a personal Amazon account. Amazon were pushing me to convert it to a Business account because I requested a handful of VAT invoices, but I opted to open a Business account and keep my personal, rather than muddy the waters of one account. Business and personal completely separate, as others have advised.

I have gone back and checked, and the items I am not paying VAT on are all from Amazon UK themselves (not third party sellers), sent to my UK trading address. I have gone back to my accountant regarding this and asked for confirmation.

In the meantime I found this article regarding EU based trades: Cross-border VAT rates in Europe - Your Europe

As you suggest, this does state that when sending goods within the EU that you don't need to charge VAT at source - however as far as I know I'm buying from Amazon UK. The same link also states:

If you buy and receive goods for business purposes from another EU country, you must declare and pay VAT on the transaction as if you had sold the goods yourself, at the applicable rate in your country.

You can usually deduct this amount later on when you make your VAT declaration.

This suggests that some kind of accounting/charging is necessary on my end - my accountant's initial advice was simply to enter the transactions into FreeAgent using a zero VAT rate, but that text implies more is required. I've been careful not to claim VAT that I've not paid, but even so something doesn't seem quite right. I won't hear more until Monday from the accountant, but I'll update when I find out more. Thanks for your suport.

[Lance]

This suggests that some kind of accounting/charging is necessary on my end - my accountant's initial advice was simply to enter the transactions into FreeAgent using a zero VAT rate, but that text implies more is required. I've been careful not to claim VAT that I've not paid, but even so something doesn't seem quite right. I won't hear more until Monday from the accountant, but I'll update when I find out more. Thanks for your suport.

Keep it simple.


If the invoice has a VAT amount on use that.
If the invoice has no VAT amount then put it as 0% in FreeAgent.
Even if the vendor has charged VAT, if they've not put it on the invoice, then you can't claim it back.

That's simple and means that, like me, you don't need to be a cross-border VAT expert. It's on the invoice or it's not.

[sparkyjf]

Keep it simple.


If the invoice has a VAT amount on use that.
If the invoice has no VAT amount then put it as 0% in FreeAgent.
Even if the vendor has charged VAT, if they've not put it on the invoice, then you can't claim it back.

That's simple and means that, like me, you don't need to be a cross-border VAT expert. It's on the invoice or it's not.

Works for me - as long as I'm doing the right thing by the VAT man then I'm happy.

[northernladuk]

Works for me - as long as I'm doing the right thing by the VAT man then I'm happy.

And HMRC by not buying personal items though it. I'd stay steer away from it until you learn the rules. Starting of with bad habits always causes problems