If you sell through Amazon FBA, VAT is rarely as simple as "register at £90,000 and charge 20%". Amazon moves your stock between fulfilment centres, marketplaces collect VAT on your behalf in some cases, and selling into the EU drags in two schemes with confusingly similar names.
This guide explains the three things that trip FBA sellers up most: the UK £135 import rule, when Amazon (not you) accounts for the VAT, and how OSS and IOSS work when you sell to EU customers. We'll keep it practical, with an illustrative worked example and a clear decision path.
It's written for UK-based and overseas sellers using Amazon FBA. If you only sell digital services, the rules differ, so treat this as a goods-focused guide.
When do FBA sellers need to register for UK VAT?
The standard rule first. A UK-established business must register for VAT once its taxable turnover passes the registration threshold of £90,000 in any rolling 12-month period (current from 1 April 2024). The standard rate is 20%.
FBA changes the picture in two ways.
First, where your stock physically sits matters. If you store goods in a UK fulfilment centre, those goods are in the UK at the point of sale. For an overseas (non-UK-established) seller, that triggers a UK VAT registration obligation regardless of turnover, because the £90,000 threshold only protects UK-established businesses.
Second, Amazon may collect the VAT for you on certain sales. That doesn't always remove the need to register. As you'll see below, you can still need a VAT number to reclaim import VAT or to handle the sales the marketplace rules don't cover.
If you're building out your store and want the VAT setup right from the start, our ecommerce accounting service and dedicated Amazon FBA accountants handle registration, scheme choice and filing together.
What is the £135 rule for imported goods?
Since 1 January 2021, low value consignment relief is gone and a single threshold applies: £135.
The £135 limit is the value of the whole consignment being imported, not each individual item inside it. It's based on the goods' selling price, excluding transport, insurance and any import duties.
Here's the split that matters:
| Consignment value | What happens | Who accounts for the VAT |
|---|---|---|
| £135 or less, goods outside the UK at point of sale | UK supply VAT charged at the point of sale, not at the border | The seller, unless sold through an online marketplace |
| £135 or less, sold through an online marketplace | Same point-of-sale VAT, but liability shifts to the marketplace | The online marketplace (e.g. Amazon) |
| Over £135 | Normal import VAT and customs rules apply at the border | Standard import procedures (the importer of record) |
So for goods you ship from outside the UK that are worth £135 or less per consignment, VAT is due at the point of sale rather than at customs. If that sale goes through Amazon, Amazon is the one who must charge and account for the VAT.
There's one exception: a business-to-business sale where the UK customer gives their UK VAT registration number. Then the customer accounts for the VAT under the reverse charge, and the marketplace steps out.
When does Amazon account for the VAT instead of you?
This is the part that genuinely surprises sellers. In two situations, the marketplace becomes liable for the VAT, not you.
According to HMRC's guidance, an online marketplace is liable for the VAT where:
- goods in a consignment of £135 or less are outside the UK at the point of sale, and sold through the marketplace; and
- goods of any value are located in the UK at the point of sale and sold by an overseas business through the marketplace.
That second point is the FBA one. If you're an overseas seller with stock in a UK Amazon warehouse, Amazon is liable for the VAT on those sales.
In that case, HMRC treats you as making a zero-rated "deemed supply" of the goods to Amazon, and Amazon accounts for the 20% to the customer. You don't disappear from the VAT system though. You still need to be VAT registered (or hold an exemption) so you can recover the import VAT you paid when the stock first entered the UK, and to report the deemed supply correctly.
For a UK-established seller, the marketplace deemed-supply rules don't apply in the same way. You charge and account for VAT on your UK sales yourself once registered, and Amazon collects the money as part of checkout but the VAT liability stays with you.
In practice, the most common mistake we see is an overseas seller assuming "Amazon handles the VAT, so I don't need to register". You usually still do, just to reclaim import VAT and stay compliant.
What are OSS and IOSS, and which do I use?
When you sell to EU consumers, two EU schemes come into play. Both launched on 1 July 2021. They sound alike but solve different problems.
One Stop Shop (OSS) is for goods already inside the EU that you sell across borders to EU consumers. Instead of registering for VAT in every member state you sell into, you file one quarterly OSS return and pay the VAT due in each country through a single registration. This is the scheme that matters if you use Amazon's EU fulfilment and hold stock in, say, Germany or France.
Import One Stop Shop (IOSS) is for low value goods imported into the EU from outside it. It covers consignments not exceeding €150. With IOSS you charge the customer's local EU VAT at checkout, the parcel clears customs without import VAT being charged again, and you file one monthly IOSS return. It speeds up delivery and avoids your customer being hit with a surprise charge on the doorstep.
One Brexit trap to flag: the EU's €10,000 distance-selling threshold, below which you could charge your home-country VAT, only applies to businesses established in the EU. UK sellers are now treated as non-EU, so that threshold doesn't help you. A single sale into the EU can create a VAT obligation from the first euro.
Here's the quick comparison:
| Feature | OSS | IOSS |
|---|---|---|
| Covers | Goods already in the EU, sold cross-border to consumers | Low value goods imported into the EU |
| Value limit | No per-consignment limit | Consignments up to €150 |
| Return frequency | Quarterly | Monthly |
| What it replaces | Multiple EU VAT registrations for distance sales | Import VAT charged at the border |
| Typical FBA use | EU stock in multiple fulfilment centres | Shipping directly to EU buyers from the UK |
You can use both if your model needs both: OSS for the stock you hold inside the EU, IOSS for the parcels you import. Many growing FBA sellers end up doing exactly that.
Illustrative example: VAT across UK and EU sales
Illustrative example. Maya runs a kitchenware brand through Amazon FBA. She is UK-established, VAT registered, and sells a £60 (inc. VAT) pan in three different ways. Figures use the current standard rate of 20%.
For a UK customer, stock in a UK fulfilment centre:
- VAT-inclusive price: £60.00
- VAT element (£60 / 6): £10.00
- Net sale: £50.00
- Maya is UK-established, so she accounts for the £10.00 output VAT on her UK return.
For an EU customer, with stock she holds in Amazon's German warehouse (an intra-EU distance sale):
- This is an OSS sale. Maya charges the customer's local EU VAT rate at checkout.
- She reports it on her quarterly OSS return and pays the VAT to the relevant member state. No separate German VAT registration needed.
For an EU customer, shipped directly from the UK as a £60 consignment (well under €150):
- This is an IOSS sale. Maya charges the buyer's local EU VAT at checkout.
- The parcel clears EU customs without a second import VAT charge, and she reports it on her monthly IOSS return.
The £10.00 figure checks out: £60 divided by 6 is £10, leaving a £50 net sale, because VAT at 20% on £50 is exactly £10. The point of the example is that the same pan can sit under three different VAT regimes depending only on where the stock is and where it ships.
A simple decision path for FBA VAT
Work through these in order:
- Is my stock in a UK fulfilment centre? If yes and you're overseas, you need UK VAT registration now (turnover doesn't matter). If you're UK-established, register once taxable turnover passes £90,000.
- Am I an overseas seller selling via Amazon with UK stock? Amazon is liable for the VAT on those sales (deemed supply), but you still register to reclaim import VAT.
- Do I ship low value goods (£135 or less) into the UK from abroad through Amazon? Amazon charges and accounts for the UK VAT at the point of sale.
- Do I hold stock inside the EU and sell cross-border to consumers? Consider OSS.
- Do I ship goods of €150 or less directly to EU consumers? Consider IOSS.
Getting step 1 wrong is the costly one. Backdated registrations, penalties and Amazon account suspensions for missing VAT numbers are all avoidable with the right setup. If you'd like a second pair of eyes on your structure, our tax advisory team and bookkeeping service keep FBA sellers compliant across the UK and EU.
Want help getting your FBA VAT right?
Book a free 20-minute call with a Zmartly accountant and we'll map your VAT obligations across the UK and EU, sort your registrations, and handle the returns. Talk to a Zmartly accountant.
Frequently asked questions
Do I need to register for UK VAT if Amazon collects it for me?
Often yes. If you're an overseas seller with stock in a UK fulfilment centre, Amazon accounts for the VAT on the sale, but you still need to be VAT registered to reclaim the import VAT you paid when the goods entered the UK and to report the deemed supply. If you're UK-established, you register once your taxable turnover passes £90,000.
What is the £135 rule in simple terms?
For goods imported into the UK in a consignment worth £135 or less, VAT is charged at the point of sale rather than at the border. If the sale goes through an online marketplace like Amazon, the marketplace is liable for that VAT. Above £135, normal import VAT and customs rules apply at the border.
Is the £135 limit per item or per parcel?
Per consignment. The £135 limit applies to the value of the whole consignment being imported, not the separate value of individual items inside it. It's based on the selling price and excludes transport, insurance and import duties.
What's the difference between OSS and IOSS?
OSS is for goods already inside the EU that you sell cross-border to EU consumers, filed quarterly. IOSS is for low value goods (consignments up to €150) imported into the EU, filed monthly, letting you charge EU VAT at checkout so parcels clear customs without a second VAT charge.
Does the EU €10,000 distance-selling threshold apply to UK sellers?
No. The €10,000 threshold only applies to businesses established in the EU. Since Brexit, UK sellers are treated as non-EU, so a sale into the EU can create a VAT obligation from the first euro.
When did these marketplace and EU e-commerce rules start?
The UK £135 rules and marketplace liability rules took effect on 1 January 2021. The EU's OSS and IOSS schemes started on 1 July 2021.
