If you sell through Amazon FBA, your single biggest year-end number is usually the stock sitting in Amazon's warehouses. Get it wrong and your profit is wrong, which means your corporation tax is wrong too.
The problem is that FBA makes this harder than a normal shop. Your units are spread across fulfilment centres, some are damaged or lost, some have been sitting so long Amazon is charging you storage fees, and the platform reports almost everything in a way that does not line up with how UK tax law expects you to value stock.
This guide walks through how to value your closing FBA inventory at year-end, how to turn that into cost of goods sold (COGS), and where it lands on your CT600. We focus on limited companies, since most established FBA sellers trade through one. Every figure is dated to the 2025/26 tax year and cited to gov.uk.
How do you value FBA stock for year-end?
You value FBA stock at the lower of cost and net realisable value, item by item. That is the only valuation basis HMRC accepts for ordinary trading stock, and it is the same rule that applies to any UK business holding inventory.
This comes straight from UK accounting standards and HMRC's own manual. FRS 102 Section 13 requires inventories to be measured at "the lower of cost and estimated selling price less costs to complete and sell". HMRC's Business Income Manual confirms there are only two acceptable bases for valuing trading stock for tax: the lower of cost and net realisable value, and mark to market. All other bases are not acceptable.
In plain terms, for each product (each SKU) you compare two figures:
- Cost - what it actually cost you to buy the units and get them into Amazon's network.
- Net realisable value (NRV) - the expected selling price in your normal market, less the further costs you will incur to sell it.
You then carry the stock at whichever is lower. For most healthy, selling product lines that will be cost, because you sell above cost. NRV only bites when something has gone wrong: the product is obsolete, damaged, out of season, or you are dumping it below cost to clear it.
You apply this test SKU by SKU, not across your whole catalogue. A bestseller sitting comfortably above cost cannot subsidise a dead line you are clearing at a loss.
What counts as the cost of FBA inventory?
Cost is more than the price on your supplier's invoice. HMRC's BIM33135 says cost "should be interpreted as meaning all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition". For an FBA seller, "present location" means inside Amazon's fulfilment centres.
So the cost of a unit of FBA stock typically includes:
| Cost component | Include in stock cost? | Notes |
|---|---|---|
| Supplier purchase price | Yes | The core unit cost on the supplier invoice. |
| Import duty | Yes | A cost of bringing goods to their location. |
| Inbound freight and shipping to UK | Yes | Allocate across the units in the shipment. |
| Freight forwarder and customs clearance fees | Yes | Cost of getting goods in. |
| Inbound shipping into Amazon (FBA inbound) | Yes | Cost of bringing stock to present location. |
| Prep, labelling and polybagging before send-in | Yes | Part of getting stock sale-ready. |
| Import VAT | No (usually) | Reclaimed as input VAT if you are VAT registered, so not a stock cost. |
| Amazon monthly storage fees | No | A period cost, expensed as incurred (see below). |
| FBA fulfilment (pick and pack) fees | No | A selling cost triggered on sale, not a cost of holding stock. |
| Amazon referral fees and PPC advertising | No | Selling and marketing costs, not stock cost. |
The line that trips sellers up is storage. Monthly FBA storage fees and long-term storage surcharges are costs of holding stock, not of bringing it to its present condition, so they are expensed in the period rather than rolled into the value of unsold units. The same goes for fulfilment fees, referral fees and advertising. They belong in your profit and loss account as costs, but they do not inflate your closing stock figure.
Import VAT is a separate point. If you are VAT registered and reclaim import VAT as input tax, it never forms part of the cost of your stock. If you are not VAT registered, irrecoverable VAT does form part of cost. The UK VAT registration threshold is £90,000 of taxable turnover for 2025/26, and most FBA businesses of any scale are well past it.
FIFO, weighted average or LIFO: which can you use?
You can use FIFO (first in, first out) or a weighted average cost. You cannot use LIFO (last in, first out) for UK tax.
This matters for FBA because your unit costs move. A supplier price rise, a weaker pound on your next import, or higher freight all mean the units you bought in March cost more than the ones from last June. When you sell, which cost do you release to COGS, and which cost stays in closing stock?
HMRC's position is settled and old. BIM33125 states plainly that base stock and "last in first out" forms of valuation "are not allowable for tax purposes". The supporting case, Minister of National Revenue v Anaconda American Brass Ltd, established that stock must be valued on the actual facts, and "there is no room for theories as to flow of costs". In practice that points to FIFO, which assumes the oldest stock sells first, or a weighted average cost, both of which HMRC accepts.
For FBA sellers this usually settles in favour of a weighted average per SKU, because Amazon commingles your units and you genuinely cannot tell which physical unit shipped. A clean weighted average cost per SKU, applied consistently, is defensible and easy to reconcile.
One rule above all: pick a method and stick to it. Switching cost-flow methods to flatter your profit invites questions, and a change in valuation basis has its own tax consequences.
How do you calculate cost of goods sold?
Cost of goods sold is the cost of the stock you actually sold during the year. The standard formula is:
Opening stock + Purchases - Closing stock = Cost of goods sold
So COGS falls out of getting your opening and closing stock right. Your opening stock is last year's closing figure. Your purchases are everything you bought in (at cost, on the same basis as above). Your closing stock is the year-end valuation you have just worked through, at the lower of cost and NRV.
The trap with FBA is the closing stock count. You cannot just trust the Amazon dashboard on your year-end date. You need to reconcile:
- Units physically in Amazon fulfilment centres (available, plus inbound and reserved).
- Units in your own or a third-party warehouse not yet sent to Amazon.
- Units in transit that you already own (often the case once goods leave the supplier on your terms).
You also strip out units Amazon has recorded as lost, disposed of or destroyed, because you no longer hold them. Where Amazon reimburses you for lost or damaged units, that reimbursement is income, not a reduction in stock cost.
Worked example: FBA closing stock and COGS
Illustrative example. Northgate Supplies Ltd is a UK limited company selling one product line through Amazon FBA. It has a 31 March 2026 year-end and is VAT registered, so it reclaims import VAT and uses a weighted average cost per unit. The figures below are illustrative.
During the year it landed stock in two batches. Cost includes the supplier price plus import duty, inbound freight and FBA send-in, all on a per-unit basis:
| Batch | Units bought | Cost per unit (landed) | Total cost |
|---|---|---|---|
| Opening stock (b/f) | 1,000 | £6.00 | £6,000 |
| Purchase 1 (June) | 3,000 | £6.50 | £19,500 |
| Purchase 2 (January) | 2,000 | £7.25 | £14,500 |
| Available to sell | 6,000 | £40,000 |
The weighted average cost is £40,000 divided by 6,000 units, which is £6.667 per unit (rounded to three decimals).
By 31 March 2026 the company has sold 4,500 units and reconciled 1,500 units of closing stock across Amazon and its own warehouse, after removing units Amazon recorded as disposed.
Closing stock at cost is 1,500 units at £6.667, which is £10,000 (1,500 multiplied by £40,000 divided by 6,000 gives exactly £10,000).
Now apply the lower of cost and NRV test. Of the 1,500 units, 1,400 sell normally above cost, so they stay at cost. The remaining 100 units are an aged, slow-selling variant the company will clear at £4.00 each, and Amazon fees to sell them are about £1.50 each, giving an NRV of £2.50, well below the £6.667 cost.
| Group | Units | Carry at | Value per unit | Stock value |
|---|---|---|---|---|
| Normal stock | 1,400 | Cost | £6.667 | £9,333 |
| Clearance units | 100 | NRV | £2.50 | £250 |
| Closing stock | 1,500 | £9,583 |
Closing stock is therefore £9,583, not £10,000. The £417 difference is the write-down to NRV on the clearance units (100 units at £6.667 cost, which is £667, less the £250 they are now worth).
Cost of goods sold then follows the formula:
- Opening stock: £6,000
- Plus purchases (Purchase 1 and Purchase 2): £19,500 + £14,500 = £34,000
- Less closing stock: £9,583
- Cost of goods sold = £30,417
That £30,417 hits the profit and loss account as a cost. It includes the £417 NRV write-down, because reducing closing stock automatically increases COGS by the same amount.
If Northgate's sales for the year were £75,000 and its other allowable running costs (storage fees, fulfilment fees, referral fees, advertising and overheads) came to £30,000, its taxable profit would be £75,000 - £30,417 - £30,000 = £14,583. At the corporation tax small profits rate of 19% for the financial year 2025 (profits up to £50,000), the tax would be £14,583 multiplied by 19%, which is £2,771 (rounded to the nearest pound).
Had the company ignored the write-down and carried closing stock at £10,000, COGS would have been £30,000, profit £15,000, and tax £2,850. The correct treatment saves £79 of tax here, and on a real catalogue with serious aged stock the difference is much larger.
Can you write down slow-moving or aged FBA stock?
You can write stock down to net realisable value, but only where you can justify it on the facts. Slow movement on its own is not enough.
This is a genuine grey area for FBA sellers, because Amazon's long-term storage fees make aged stock visibly painful long before it is genuinely worthless. HMRC's BIM33150 is clear that a provision must rest on a justified assumption about obsolescence, and that "the fact that stock is slow moving is not justification for a write-down below cost". A vague blanket percentage across the whole catalogue will not stand up.
What does stand up is evidence. If a product is discontinued, superseded, damaged, past its sell-by window, or you have actually committed to clearing it below cost, you have a basis to value it at NRV. The strongest evidence is the clearance price you are genuinely selling or about to sell at, less the Amazon fees to shift it.
In practice the cleanest approach is to identify specific problem SKUs, evidence the NRV for each, and write only those down, exactly as in the worked example. That is defensible. A general provision plucked from the air is not.
If you need a hand building a year-end stock file that survives an HMRC enquiry, our statutory accounts service is built around exactly this kind of reconciliation.
Where does inventory and COGS go on the CT600?
The CT600 itself does not have a "stock" or "cost of goods sold" box. Your closing stock and COGS live in your statutory accounts and your tax computation, which you file alongside the CT600 as one Company Tax Return.
This is the part sellers misunderstand. A Company Tax Return is not just the CT600 form. Gov.uk is explicit that the profit or loss you work out for corporation tax "is different from the profit or loss shown in your annual accounts". The return is made up of three things filed together:
- The CT600 form - the headline figures and your corporation tax calculation.
- Your statutory accounts - where closing stock sits on the balance sheet and COGS sits in the profit and loss account.
- Your tax computation - which bridges accounting profit to taxable profit.
So your FBA stock valuation feeds your accounts profit, the computation adjusts that profit for tax (adding back depreciation, applying capital allowances and so on), and the resulting taxable profit is what carries through to the tax figure on the CT600.
Two deadlines apply, and they are not the same. You must file the Company Tax Return within 12 months of the end of your accounting period. You must pay the corporation tax earlier, usually 9 months and one day after the end of the accounting period. In other words, you normally pay the tax before the return is even due, so your stock figure needs to be reliable months before filing.
For the full picture of how the accounts, computation and CT600 fit together, our corporation tax service and our guidance for Amazon FBA sellers walk through the year-end process end to end.
FAQs
Do I value FBA stock at what I paid or what it sells for?
At the lower of the two, tested per SKU. You compare cost (what you paid to land it in Amazon's network) against net realisable value (expected selling price less the costs to sell), and carry the stock at whichever is lower. For most selling lines that is cost.
Are Amazon storage and FBA fees part of my stock cost?
No. Storage fees, fulfilment (pick and pack) fees, referral fees and advertising are period costs that go straight into your profit and loss account. Only the costs of buying stock and getting it to its present location and condition, such as the supplier price, duty and inbound freight, form part of stock cost.
Can I use LIFO to value my Amazon inventory?
No. LIFO (last in, first out) is not an allowable basis for UK tax. HMRC accepts FIFO or a weighted average cost. Most FBA sellers use a weighted average per SKU because Amazon commingles units and you cannot identify which physical unit sold.
Can I write off old FBA stock that is racking up long-term storage fees?
Only if you can justify it. Slow movement alone is not a reason to write stock down. You need evidence that the stock is obsolete, damaged or genuinely being cleared below cost, and you value it at that net realisable value. Write down specific problem SKUs with evidence, not a blanket percentage.
Where do I put inventory and COGS on the CT600?
Neither has its own CT600 box. Closing stock appears on the balance sheet and COGS in the profit and loss account of your statutory accounts, which you file alongside the CT600 and a tax computation as a single Company Tax Return. The accounts profit, as adjusted by the computation, drives the figure on the CT600.
When is my corporation tax due if I get my stock figure late?
You must pay corporation tax 9 months and one day after your accounting period ends, even though the Company Tax Return is not due until 12 months after. That gap is why your FBA stock valuation needs to be reliable well before the filing deadline.
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Get your FBA year-end right
Closing stock is the number HMRC is most likely to question on an FBA company, and it is the number Amazon reports least helpfully. If you want your inventory reconciled, your COGS calculated correctly and your CT600 filed without nasty surprises, book a free call with a Zmartly accountant and we will sort your year-end properly.
