If you sell on Amazon and pull your sales straight into QuickBooks as one lump deposit, your books are almost certainly wrong. The payout that lands in your bank is net of Amazon fees, FBA charges, refunds, reserves and sometimes VAT that Amazon has already collected. Booking that single figure as "sales" hides all of it.
The fix is a clearing account. It is a holding account that captures the gross activity from each Amazon settlement, then nets down to the exact payout that hits your bank. When the clearing account balances back to zero (or to the running reserve), you know every penny is accounted for.
This guide shows you how to build one in QuickBooks Online for a UK seller, how to map fees, refunds and VAT, and walks through a full settlement journal with current figures. It is written for VAT-registered and not-yet-registered sellers alike, and it flags the HMRC rules that change how you post the numbers.
If you run an FBA business and want this set up and reconciled for you, our Amazon FBA accountants do exactly this every month.
What is an Amazon clearing account and why do you need one?
An Amazon clearing account is a temporary holding account in QuickBooks where you record the full detail of each Amazon settlement (gross sales, fees, refunds, reserves and tax), so the net amount left in it matches the payout that arrives in your bank.
Amazon does not pay you your sales. It pays you sales minus everything it has deducted, on a roughly fortnightly settlement cycle. If you book the bank deposit as income, your turnover is understated, your Amazon fees never appear as an expense, and your VAT is wrong. A clearing account separates the gross from the net so each line lands in the right place.
Think of it as the bridge between Seller Central and your bank. The settlement report tells you what really happened. The bank tells you what you were paid. The clearing account reconciles the two.
How do you create the clearing account in QuickBooks?
You only build this once. In QuickBooks Online:
- Go to Transactions > Chart of accounts > New.
- Set Account type to Current assets (sometimes shown as Bank, but Current assets keeps it out of your bank-feed list).
- Set Detail type to Other current assets.
- Name it clearly, for example Amazon Clearing Account.
- Leave the opening balance blank. A clearing account should start at zero.
- Save.
If you sell across more than one Amazon marketplace (UK, EU, US), create a separate clearing account per marketplace and per currency. Mixing GBP and EUR settlements in one account makes reconciliation a nightmare, and exchange differences get buried.
You will also want a small set of supporting accounts before you post your first settlement, which we map next.
What accounts do you need to map Amazon activity to?
A clean Amazon chart of accounts separates the things HMRC and you actually care about. Here is the minimum set, with how each line behaves.
| Account | Type | What goes here | VAT treatment (VAT-registered seller) |
|---|---|---|---|
| Amazon Clearing Account | Current asset | The holding account every line passes through | No VAT |
| Sales: Amazon | Income | Gross product sales to customers | 20% standard rate on standard-rated goods |
| Amazon selling fees | Expense | Referral fees, closing fees, advertising | UK VAT charged by Amazon; reclaim as input tax (see below) |
| Amazon FBA fees | Expense | Fulfilment, storage, removal, prep | UK VAT charged by Amazon; reclaim as input tax (see below) |
| Refunds | Contra-income | Customer refunds Amazon processes | Reverses the original sale VAT |
| Amazon reserve / unavailable balance | Current asset | Funds Amazon holds back at period end | No VAT |
A few notes that save pain later:
- Keep sales gross. The temptation to net fees against sales is the single most common error, and it understates both turnover and costs.
- Refunds should reduce income, not sit as an expense, so your net sales figure is true.
- The reserve line lets your clearing account balance to the actual payout even when Amazon is holding money back.
The standard UK VAT rate of 20% applies to standard-rated goods for the current period, per gov.uk's VAT rates guidance.
How do you post an Amazon settlement, step by step?
The workflow is the same every settlement period, whether you do it by journal or with a settlement-import tool.
- Download the settlement report from Seller Central (Payments > Reports Repository, or the date-range summary).
- Read off the totals: product sales, refunds, selling fees, FBA fees, advertising, any VAT collected by Amazon, and the closing reserve.
- Post one journal dated to the settlement end date that:
- Credits Sales: Amazon with gross sales.
- Debits Refunds with refunds issued.
- Debits Amazon selling fees and Amazon FBA fees.
- Posts VAT correctly (see the VAT section).
- Debits or credits the reserve account for any change in held funds.
- Balances the difference to the Amazon Clearing Account.
- When the payout lands, record the bank deposit straight into the Amazon Clearing Account.
- Check the clearing account nets to zero for that settlement (allowing for the reserve carried forward). If it does not, a line is missing or miscoded.
That final balance check is the whole point. A clearing account that returns to zero is your proof the settlement is fully and correctly recorded.
A worked settlement example
Illustrative example. Maya runs a VAT-registered FBA homeware brand selling standard-rated goods to UK customers. Her 14-day Amazon settlement for the period ending 16 May 2026 shows the following (all figures illustrative):
| Settlement line | Amount |
|---|---|
| Gross product sales (VAT-inclusive) | £12,000.00 |
| Customer refunds (VAT-inclusive) | -£600.00 |
| Amazon referral and selling fees | -£1,800.00 |
| FBA fulfilment and storage fees | -£900.00 |
| Reserve held back by Amazon | -£500.00 |
| Net payout to bank | £8,200.00 |
First, the VAT inside the sales. The £12,000 of standard-rated sales is VAT-inclusive, so the VAT element is £12,000 / 6 = £2,000, leaving net sales of £10,000. The £600 of refunds is also VAT-inclusive: VAT of £600 / 6 = £100, net £500. (Dividing a 20% VAT-inclusive figure by 6 gives the VAT; this is the standard HMRC method for the 20% VAT rate.)
Since 1 August 2024, Amazon charges UK VAT directly on its selling and FBA fees to UK-established sellers, so the fee figures above are VAT-inclusive and Maya reclaims that VAT as input tax in box 4. There is no reverse charge to account for. The combined fees are £1,800 + £900 = £2,700 (VAT-inclusive), so the VAT element is £2,700 / 6 = £450 of input tax she reclaims in box 4, leaving net fees of £2,250. (Dividing a 20% VAT-inclusive figure by 6 gives the VAT, per gov.uk's VAT rates guidance.)
The settlement journal, dated 16 May 2026:
| Account | Debit | Credit |
|---|---|---|
| Amazon Clearing Account | £8,200.00 | |
| Amazon reserve | £500.00 | |
| Refunds (net) | £500.00 | |
| VAT control (refund VAT reversed) | £100.00 | |
| Amazon selling fees (net) | £1,500.00 | |
| Amazon FBA fees (net) | £750.00 | |
| VAT control (input VAT on fees) | £450.00 | |
| Sales: Amazon (net) | £10,000.00 | |
| VAT control (output VAT on sales) | £2,000.00 | |
| Totals | £12,000.00 | £12,000.00 |
Because Amazon now charges UK VAT on the fees directly, the £450 of input VAT is recovered as part of this same journal (box 4 input tax). There is no separate reverse-charge entry, and nothing is added to box 1 for the fees.
When the £8,200 payout arrives, Maya codes the bank deposit to the Amazon Clearing Account. The £8,200 debit from the deposit cancels the £8,200 credit position the journal left in the clearing account, so it returns to zero for the period. The £500 reserve sits as a current asset until Amazon releases it in a later settlement. Every figure is now in the right place: turnover is £10,000, net fees are £2,250 with £450 of recoverable input VAT, refunds reduce income by £500, and VAT is correct on both sides.
How does VAT affect the clearing account?
The clearing account itself never carries VAT. It is just a holding bucket. The VAT lives on the lines that pass through it: output VAT on your sales, the VAT reversed on refunds, and the UK input VAT Amazon now charges on its fees.
The key principle is that your VAT return must reflect the gross sale, not the net payout. If you only booked the £8,200 that hit the bank in Maya's example, you would understate output VAT by hundreds of pounds and risk an assessment. Making Tax Digital is mandatory for all VAT-registered businesses, so these figures must flow from digital records into your return via compatible software, per HMRC's Making Tax Digital for VAT guidance.
Where Amazon itself has collected and remitted VAT on a sale (for example on certain low-value imported goods or sales by overseas sellers), that VAT is Amazon's to account for, not yours. You still record the sale, but the VAT treatment differs, which is why the marketplace rules below matter.
How do Amazon's selling fees work for VAT?
Since 1 August 2024, Amazon charges UK VAT directly on its selling and FBA fees to UK-established sellers. The fees are billed by Amazon's UK entity and carry 20% UK VAT on the invoice, so the old reverse-charge treatment no longer applies to these fees.
In practice this means the VAT on your Amazon fees is ordinary UK input tax. If you are VAT-registered and the fees relate to taxable supplies, you reclaim that VAT in box 4 of your VAT return in the normal way, supported by Amazon's VAT invoice. Nothing goes into box 1 for the fees; there is no self-supply to account for.
Two things sellers miss:
- Make sure you post the fees VAT-inclusive and split out the input VAT, rather than treating the whole fee as a net cost. Under the pre-August-2024 reverse charge the fee carried no VAT on the invoice; now it does, and missing that input tax overstates your costs and understates your VAT reclaim.
- If you are not yet VAT-registered, you cannot reclaim this VAT, so the VAT-inclusive fee is a real cost. Your own taxable sales still drive the £90,000 registration test; the current threshold is £90,000, per gov.uk's VAT registration thresholds. Once registered, keep Amazon's VAT invoices to support the box 4 reclaim.
What about imports, the £135 rule and the marketplace VAT rules?
If you import stock from outside the UK, two VAT mechanics affect how money flows through your books.
Postponed VAT accounting (PVA) lets a VAT-registered importer account for import VAT on the VAT return instead of paying it at the border and reclaiming later. You declare it in box 1 and reclaim it in box 4 using your monthly postponed import VAT statement, and put the value of the goods in box 7, per gov.uk's guidance on completing your VAT return for import VAT. PVA is a separate purchase entry, not part of the Amazon settlement clearing account, but sellers often confuse the two.
The £135 consignment rule and marketplace rules can shift who accounts for VAT. For goods in consignments valued at £135 or less that are outside the UK and sold through an online marketplace to Great Britain customers, UK supply VAT is charged at the point of sale, and the marketplace (not the seller) is generally liable to account for that VAT on sales by sellers not established in the UK, per gov.uk's marketplace VAT guidance. The £135 limit applies to the whole consignment, not each item.
In practice, if Amazon has already collected and remitted VAT on a sale under these rules, you must not also account for output VAT on it, or you will pay twice. Your clearing account should split those "marketplace-facilitated VAT" sales from your own standard-rated sales. If you are a UK-established seller selling your own UK-located stock, you remain responsible for VAT on those sales in the normal way.
This is the area where Amazon bookkeeping goes wrong most often. If your stock crosses borders, get the VAT mapping reviewed before you scale.
Cash basis or accruals: does it change the clearing account?
The clearing-account mechanics are the same either way. What changes is the timing of when income and expenses hit your accounts.
From the 2024 to 2025 tax year, the cash basis is the standard (default) method of recording income and expenses for sole traders and most partnerships, and you must opt out if you want to use traditional accruals accounting instead, per gov.uk's cash basis guidance. Under cash basis you recognise income when the payout is received and expenses when paid.
For a high-volume FBA business, accruals accounting often gives a truer picture, because it matches sales to the period they occurred and recognises the reserve and in-transit settlements correctly. Limited companies prepare accounts on the accruals basis regardless. Whichever you use, the clearing account still does its job of reconciling each settlement.
If you are weighing up sole trader versus limited company as your FBA business grows, our Amazon FBA accountants can model the tax difference for your numbers.
Common clearing-account mistakes we see
- Booking the net payout as sales. Turnover and fees both vanish. This is the big one.
- Netting refunds against fees. Refunds belong against income; fees are costs. Mixing them distorts both.
- Forgetting the reserve. If you ignore the held-back balance, your clearing account will never reconcile to zero.
- Missing the input VAT on fees. Since 1 August 2024 Amazon charges UK VAT on its fees; failing to reclaim it in box 4 (or still trying to apply the old reverse charge) is a common error on VAT inspections.
- Mixing currencies in one clearing account. EU and US settlements need their own accounts to handle exchange cleanly.
- Double-counting marketplace VAT. Accounting for VAT that Amazon already remitted means paying it twice.
Frequently asked questions
What account type should an Amazon clearing account be in QuickBooks?
Set it up as a Current asset with the detail type Other current assets, named something obvious like "Amazon Clearing Account". This keeps it out of your bank-feed list while still letting every settlement line pass through it before netting to the payout.
Should Amazon sales be recorded gross or net in QuickBooks?
Always gross. Record full product sales as income, then post Amazon's fees, FBA charges and refunds as separate lines through the clearing account. Booking only the net payout understates both your turnover and your costs, and it produces the wrong VAT figures.
Do I charge VAT on Amazon fees, or does the reverse charge apply?
Since 1 August 2024, Amazon charges UK VAT directly on its selling and FBA fees to UK-established sellers, so the reverse charge no longer applies. The fees carry 20% UK VAT on Amazon's invoice, and if you are VAT-registered you reclaim that VAT as input tax in box 4 of your VAT return; nothing goes in box 1 for the fees. If you are not yet registered you cannot reclaim it, so the VAT-inclusive fee is a real cost.
How do I handle VAT that Amazon collects on my sales?
Where Amazon is liable to account for VAT under the marketplace and £135 consignment rules (for example certain low-value imported goods or sales by overseas sellers), that VAT is Amazon's responsibility, not yours. Record the sale but do not also account for output VAT on it, or you will pay twice. Keep those sales separate in your clearing account.
Does the clearing account work the same on cash basis and accruals?
Yes. The clearing account always reconciles each settlement to the payout. Cash basis (the default for sole traders from the 2024 to 2025 tax year) changes only when income and expenses are recognised. Accruals accounting often suits high-volume FBA sellers better, and limited companies must use it.
Why won't my Amazon clearing account balance to zero?
The usual culprits are a missing reserve adjustment, a fee line you forgot to post, a refund coded to the wrong place, or a settlement that spans two periods. Re-check the settlement report total against the sum of every line you posted; the difference points straight to the missing entry.
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Get your Amazon books reconciling cleanly
A clearing account is simple to build and powerful once it is running, but the VAT mapping (reclaiming the UK VAT on fees, PVA, marketplace rules) is where most FBA sellers slip. If you would rather have it set up correctly and reconciled every month, our Amazon FBA accountants at Zmartly handle the full settlement-to-VAT-return workflow for UK sellers. Book a call and we will review your current setup.
