The question that separates an accountant who understands FBA from one who does not is simple: “Does Amazon collect the VAT on my sales, or do I?” If the answer comes back as a flat yes or no, keep looking. The correct answer depends on where your stock sits at the point of sale and whether you are established in the UK — and getting it wrong in either direction is expensive.
FBA is not a harder business to account for than a shop. It is a business where four specific things go wrong repeatedly, and where general practice experience does not prepare you for any of them.
The four things that actually go wrong
1. Settlement reports are recorded net
Amazon does not pay you your sales. It pays you sales, less referral fees, less FBA fees, less storage, less advertising, less refunds, plus or minus reserve movements — as a single deposit every two weeks.
Booking the deposit as turnover is the single most common FBA bookkeeping error. It understates revenue, hides the fee base entirely, and produces a VAT return that does not reconcile to anything. Your VAT registration test runs on gross taxable turnover, not on what lands in your bank.
The settlement period also straddles your year end almost every time. A settlement running 28 March to 10 April has to be split, with the March portion accrued. An accountant who has done this before will ask for the raw settlement files, not the summary.
2. Inventory valuation
Stock held in Amazon’s fulfilment centres is your asset until it sells, and it must appear on your balance sheet at the lower of cost and net realisable value.
Amazon’s inventory ledger tells you how many units sit where. It does not tell you what they cost you. You have to build landed cost yourself — purchase price, inbound freight, customs duty, prep — and hold it per SKU. Add stock in transit, unfulfillable units, and inventory sitting in three countries, and the year-end figure becomes a genuine piece of work rather than a number you pull off a screen.
Get it wrong and both your profit and your Corporation Tax are wrong.
3. Multi-jurisdiction VAT
Two rules matter, and they are frequently conflated.
| Situation | Who accounts for the VAT |
|---|---|
| Goods outside the UK at point of sale, consignment £135 or less, sold to a GB customer through the marketplace | The online marketplace |
| Goods in the UK at point of sale, sold by a seller not established in the UK | The online marketplace |
| Goods in the UK at point of sale, sold by a UK-established seller | You |
| Consignments over £135 imported into GB | Normal import VAT and customs rules |
That third row is the one generalists miss. If you are a UK-established business selling UK-held stock, Amazon does not collect your VAT — you do. Amazon holds evidence of your establishment status on file, and if it concludes you are not UK-established it will start withholding VAT on your sales and may seek historic amounts. Keeping that evidence current is an operational task, not a filing task.
Selling into the EU adds a further layer. The One Stop Shop covers intra-EU distance selling, but it does not remove the requirement to register locally in each member state where you hold stock. Pan-EU FBA moves your inventory across borders automatically, so enabling it can create registration obligations in several countries at once. This is genuinely complex and country-specific — take advice before switching it on, not after.
4. Amazon’s own fees
Where Amazon invoices you from an entity outside the UK, the reverse charge applies. There is a trap in that.
If you are not VAT registered and you receive reverse-charge services from overseas suppliers, the value of those services counts towards your registration threshold. VAT Notice 741A is explicit: you may be required to register even where your own taxable supplies are below £90,000. A seller with £70,000 of sales and £25,000 of overseas-invoiced platform fees can be liable to register without realising it. Check which Amazon entity your fee invoices come from and what your accountant has done with them.
The rest of the compliance picture
VAT registration is compulsory once taxable turnover exceeds £90,000 on a rolling 12-month basis, or where you expect to exceed it in the next 30 days alone. All VAT returns are filed under Making Tax Digital, and returns and payment are due one calendar month and seven days after the period end.
The 40% first-year allowance for expenditure incurred on or after 1 January 2026 is worth knowing if you buy equipment. It covers new and unused main-rate plant and machinery, is available to unincorporated businesses, and excludes cars and second-hand assets. The main pool writing-down allowance dropped from 18% to 14% on 1 April 2026 for Corporation Tax and 6 April 2026 for Income Tax. The Annual Investment Allowance remains £1,000,000.
If you trade through a company, Corporation Tax is 19% on profits up to £50,000 and 25% above £250,000, with an effective 26.5% marginal rate in between. Payment is due nine months and one day after the year end — roughly three months before the CT600 is due.
What to actually ask a prospective accountant
| Question | What a good answer sounds like |
|---|---|
| How will you record my Amazon settlements? | At transaction level from the settlement files, with fees grossed up — not the bank deposit |
| Who accounts for VAT on my UK sales? | A question back about establishment status and where stock sits |
| How do you value my FBA inventory? | Landed cost per SKU, plus in-transit and unfulfillable units |
| I’m considering Pan-EU FBA — what happens? | Local registrations where stock is stored, and a referral or in-house capability for each country |
| Are my Amazon fees reverse charge? | Depends which entity invoices you, and it affects your registration threshold |
| What’s the fee, and what is not included? | A number, and a clear list of exclusions |
Two further points.
Check the regulator, not the branding. “Accountant” is not a protected term in the UK. Anyone can use it. ICAEW, ACCA and ICAS members are bound by professional standards, hold professional indemnity insurance and are subject to a complaints process. Ask which body, and check the register.
Be honest about scope. Overseas VAT registrations and disputes with foreign tax authorities are specialist work. A firm that says “we handle UK compliance and work with a partner for EU registrations” is being straight with you. A firm that claims to do everything in every country probably is not.
Frequently asked questions
Does Amazon pay my VAT for me?
Only in defined cases. Amazon accounts for the VAT where goods are outside the UK at the point of sale in a consignment of £135 or less sold to a GB customer, and where goods are in the UK at the point of sale but sold by a seller who is not established in the UK. If you are a UK-established business selling UK-held stock, you account for your own VAT.
Do Amazon fees count towards the £90,000 VAT registration threshold?
Your own sales count. Separately, if you are not VAT registered and you receive services from overseas suppliers that fall under the reverse charge, the value of those services must be added to your own taxable supplies when testing whether you must register. Depending on which Amazon entity invoices you, platform fees can fall into this. It is worth checking.
What happens to my VAT if I turn on Pan-EU FBA?
Amazon may move your stock into other member states. Holding stock in a country generally creates a VAT registration obligation there, and the One Stop Shop does not remove it. Get country-specific advice before enabling it.
How should FBA inventory be valued at the year end?
At the lower of cost and net realisable value. Cost means landed cost — purchase price plus inbound freight, duty and prep — held per SKU, including units in transit and units held as unfulfillable. Amazon’s reports give you quantities, not costs.
Is an online accountant suitable for an FBA business?
Often better suited, because the work is data-driven and the records are already digital. What matters is whether the firm is regulated by a recognised professional body and whether it has handled marketplace settlement data and multi-country VAT before. Premises are not the test.
Getting your FBA numbers right
Most FBA sellers do not need a bigger accountant. They need one who has seen a settlement file before, asks where the stock is, and says plainly which parts of the job are outside their scope.
SmartFiling works with UK small businesses on fixed-fee accounts, VAT and Corporation Tax, with every submission reviewed by an ICAEW Chartered Accountant. We support Xero, QuickBooks, FreeAgent, Sage and Dext, so your existing bookkeeping stack stays where it is.
