If you sell on Amazon and you are based in the UK, your monthly fee statements changed on 1 August 2024. Amazon now adds 20% UK VAT to your selling fees, FBA fees and subscription. The fees themselves did not go up, but a new VAT line did appear.
This trips up a lot of sellers. The fees used to arrive with no VAT on them, handled quietly through something called the reverse charge. Now you are charged VAT directly, and what happens next depends entirely on whether you are VAT registered.
Here is exactly what changed, why, how to reclaim the VAT if you can, and what it costs you if you cannot. We have grounded every rule and figure in the relevant HMRC guidance, with sources at the end.
What actually changed on 1 August 2024? {#what-changed}
From 1 August 2024, Amazon charges 20% UK VAT on the seller fees it bills to UK-established sellers, because the legal entity that supplies those services changed. If you are VAT registered you can usually reclaim that VAT. If you are not registered, the fees effectively cost you 20% more.
The mechanics are simple once you see them. Until 31 July 2024, your Amazon services were supplied by Amazon Services Europe S.a r.l. (ASE), based in Luxembourg with no UK establishment. From 1 August 2024, the same services are supplied by Amazon EU S.a r.l. (AEU), which invoices UK sellers through its UK branch. The driver is the place-of-supply rule, not Amazon's discretion: where the supplier has a UK establishment that makes the supply, the supply belongs in the UK and UK VAT applies, so 20% is charged on the fees (HMRC place of supply guidance, VAT Notice 741A, section 4).
Amazon confirms the same in its own seller guidance, telling UK-established sellers that from 1 August 2024 their Amazon fees are billed by Amazon EU S.a r.l. and that "local VAT rules apply and VAT will be charged on your Amazon fees" (Amazon Seller Central: VAT on Amazon fees). The legal reason the VAT applies, though, is the gov.uk belonging rule above, not the announcement itself.
This covers the lot: referral (selling) fees, FBA fulfilment and storage fees, the Professional selling plan subscription, and advertising. UK advertising fees were already billed with UK VAT before this change, so for many sellers the visible difference is the new VAT on referral and FBA fees.
Why were Amazon fees VAT-free before? {#why-vat-free-before}
They were never truly VAT-free. The VAT was just handled by you, not by Amazon, through the reverse charge.
When a UK VAT-registered business buys most services from a supplier based outside the UK, the place of supply for VAT is where the customer belongs. That is the general business-to-business rule in HMRC's place of supply guidance (VAT Notice 741A, section 6.3). So the supply was treated as taking place in the UK, but the overseas supplier did not charge UK VAT.
Instead you accounted for it yourself. Under the reverse charge (Notice 741A, section 5), you act as both supplier and customer: you put the VAT in Box 1 of your VAT return as output tax, and reclaim the same amount in Box 4 as input tax. For a fully taxable business the two cancel out, so there is no real cost. That is why the old fee statements showed no VAT, yet HMRC still saw the transaction.
Now that AEU bills through a UK branch, the supplier belongs in the UK. The reverse charge no longer applies, and Amazon charges you 20% VAT directly, the same as any UK supplier would.
Do I pay 20% VAT on Amazon fees now? {#do-i-pay-vat-now}
Talk to an e-commerce accountant →
If you are a UK-established seller, yes. From 1 August 2024 your Amazon fee statements show 20% UK VAT, the standard rate (gov.uk VAT rates).
What matters is the net effect, and that depends on your VAT status:
| Your VAT status | What happens to the 20% VAT on fees |
|---|---|
| VAT registered, standard accounting | You pay it to Amazon, then reclaim it in full on your VAT return. Net cost: nil. |
| VAT registered, Flat Rate Scheme | You pay it to Amazon and generally cannot reclaim it. It becomes a real cost. |
| Not VAT registered | You pay it to Amazon and cannot reclaim it. Fees effectively rise 20%. |
So the change is broadly cash-flow neutral for standard VAT-registered sellers, but a genuine cost increase for smaller sellers below the £90,000 VAT registration threshold (gov.uk VAT thresholds) and for those on the Flat Rate Scheme.
How do I reclaim VAT on Amazon seller fees? {#how-to-reclaim}
If you are VAT registered on standard (accrual or cash) accounting, you reclaim the VAT on Amazon fees as input tax, the same way you reclaim VAT on any other UK business cost.
The steps are straightforward:
- Get the VAT invoice. Amazon issues a monthly VAT invoice for your fees in Seller Central (under Reports, then Tax Document Library). You need a valid VAT invoice to reclaim input tax (Notice 700/12, Box 4).
- Check your VAT number is on your Amazon account. Make sure your UK VAT registration number is entered in Seller Central so your invoices are issued correctly to your business.
- Put the VAT in Box 4. The VAT Amazon charged you goes in Box 4 of your VAT return as input tax reclaimed.
- Put the net fee value in Box 7. The fee amount excluding VAT goes in Box 7, your total purchases.
- Stop applying the reverse charge to these fees. For periods from 1 August 2024 onwards there is nothing to put in Box 1 for Amazon UK fees, because Amazon now charges the VAT. The old Box 1 and Box 4 reverse charge entries no longer apply to them.
The box treatment for input tax and the reverse charge comes from HMRC's VAT return guidance (Notice 700/12) and Notice 741A. Everything must be kept and filed digitally under Making Tax Digital for VAT, which is mandatory for all VAT-registered businesses (gov.uk Making Tax Digital for VAT).
Worked example: reclaiming VAT on a month of fees {#worked-example}
Illustrative example. Priya runs a homeware brand selling through Amazon FBA. She is VAT registered in the UK on standard accounting. In one month her Amazon fee statement shows:
| Fee type | Net fee | VAT at 20% | Gross charged |
|---|---|---|---|
| Referral (selling) fees | £1,200.00 | £240.00 | £1,440.00 |
| FBA fulfilment and storage | £800.00 | £160.00 | £960.00 |
| Professional selling plan | £25.00 | £5.00 | £30.00 |
| Total | £2,025.00 | £405.00 | £2,430.00 |
The arithmetic: net fees of £2,025 x 20% = £405 VAT, giving £2,430 charged to her account.
On her VAT return for that period, Priya reclaims the £405 in Box 4 and includes the £2,025 net value in Box 7. Because she can reclaim it in full, the real cost of her fees is still £2,025. The 20% VAT washes through.
Now compare the same month if Priya were not VAT registered. She would still be charged £2,430, but she could not reclaim the £405. That £405 becomes a genuine extra cost for the month, around £4,860 over a full year at this level. That is the practical sting of the change for smaller sellers.
What if I am not VAT registered? {#not-registered}
You cannot reclaim the VAT, so your Amazon fees genuinely cost 20% more than they did before August 2024. There is no way around that while you stay unregistered, because reclaiming input tax requires being VAT registered.
This pushes some growing sellers to look hard at voluntary VAT registration. The trade-off is real and worth modelling properly:
- In favour: you reclaim VAT on Amazon fees, on FBA-related costs, on stock bought from UK VAT-registered suppliers, and on other overheads.
- Against: you must charge 20% VAT on your sales. If you sell mainly to UK consumers who cannot reclaim it, you either absorb that or raise prices, which can hurt competitiveness.
There is no single right answer. It depends on your margins, your customer mix and your cost base. If you are close to the £90,000 registration threshold, or weighing up voluntary registration to recover this VAT, this is exactly the kind of decision we model with Amazon sellers on our accounting service for Amazon FBA sellers before you commit either way.
What if I use the Flat Rate Scheme? {#flat-rate}
This is where the change bites hardest, and it is easy to miss.
Under the Flat Rate Scheme you pay HMRC a fixed percentage of your gross turnover and, in return, you generally cannot reclaim input tax on your purchases (VAT Notice 733). The only common exception is a single capital asset purchase of £2,000 or more including VAT, which Amazon fees are not.
While Amazon fees were handled under the reverse charge, Flat Rate Scheme users effectively did not bear VAT on them in the same way. Now that Amazon charges UK VAT directly, that 20% is input tax you usually cannot recover under the scheme. So for many Flat Rate sellers, the 1 August 2024 change turned a neutral cost into a real one.
If you are on the Flat Rate Scheme, it is worth checking whether standard VAT accounting now leaves you better off, especially if you carry meaningful FBA and advertising costs. We cover this in our Amazon FBA accounting service, and you can sense-check the headline VAT impact with our VAT and income tax calculators while you gather the numbers.
Is this the same as the VAT Amazon collects on my sales? {#omp-vat}
No, and it is important not to confuse the two. They are completely separate rules.
The fee VAT covered above is VAT on what Amazon charges you. The other rule is about VAT on what your customers pay, where Amazon acts as a "deemed supplier" of the goods.
Under the online marketplace rules, Amazon is liable to account for the VAT on certain sales for you, not on its fees. This applies mainly to:
- Goods located outside the UK in a consignment valued at £135 or less, sold to UK customers through the marketplace.
- Goods already in the UK that are sold by an overseas (non-UK established) seller through the marketplace.
In those cases Amazon collects and pays the VAT on the sale (gov.uk: VAT and overseas goods sold to customers in the UK using online marketplaces). If you are a UK-established seller selling your own UK stock, these deemed-supplier rules generally do not apply to you, and you account for VAT on your sales in the normal way. The fee VAT change applies regardless of all this.
What about digital platform reporting from 2025? {#platform-reporting}
This is another separate change that often gets bundled in, so it is worth a clean answer.
Under the reporting rules for digital platforms, platforms like Amazon report seller income to HMRC. The first reports, covering the 2024 calendar year, were due by 31 January 2025. You should also receive a copy of what was reported about you.
Crucially, this is reporting, not a new tax. HMRC's guidance is explicit that "a platform reporting your details to HMRC does not automatically mean you owe tax" (gov.uk: selling goods or services on a digital platform). A platform does not have to report you if you make fewer than 30 sales of goods in the calendar year and receive less than 2,000 euros (about £1,700) for them. It simply means HMRC can match what platforms see against what you declare, so it pays to have your bookkeeping straight.
Frequently asked questions {#faqs}
Why is there suddenly VAT on my Amazon fees?
Because the Amazon entity that supplies your services changed on 1 August 2024, from Amazon Services Europe S.a r.l. in Luxembourg to Amazon EU S.a r.l. billing through its UK branch. As a UK-belonging supplier it now charges 20% UK VAT on fees, whereas before the fees were handled under the reverse charge.
Can I reclaim the VAT Amazon charges on seller fees?
If you are VAT registered on standard accounting, yes. You reclaim it as input tax in Box 4 of your VAT return and include the net fee value in Box 7, just like any other UK business cost. You need the VAT invoice from Seller Central to support the claim.
Do my Amazon fees cost more now?
For standard VAT-registered sellers, no, because you reclaim the VAT in full. For sellers who are not VAT registered, or who use the Flat Rate Scheme, yes, because you generally cannot reclaim the 20%, so your fees effectively rise by that amount.
Do I still apply the reverse charge to Amazon fees?
Not for UK fees billed from 1 August 2024 onwards. Amazon now charges the VAT directly, so there is no reverse charge entry to make in Box 1 for those fees. For periods before that date the old reverse charge treatment still stood.
Does this affect sellers who are not VAT registered the most?
Yes. If you cannot reclaim VAT, the change is a straight 20% increase in the cost of your Amazon fees. It can be a strong reason to model whether voluntary VAT registration leaves you better off, particularly if you carry significant FBA and advertising costs.
Is the VAT on fees the same as Amazon collecting VAT on my sales?
No. VAT on fees is what Amazon charges you for its services. The marketplace VAT rules, where Amazon acts as deemed supplier, concern VAT on certain sales to your customers, such as low-value goods under £135 from overseas or UK stock sold by overseas sellers. They are separate rules.
Get the VAT treatment right
Getting this right is the difference between a cash-flow-neutral fee change and a quiet 20% margin hit. If you sell through Amazon FBA and want your fee VAT reclaimed correctly, your scheme choice checked, and your VAT returns filed under Making Tax Digital without the guesswork, talk to us. Book a call with a Zmartly accountant through our Amazon FBA accounting service and we will make sure you are not paying VAT you could be reclaiming.
