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Foreign Director VAT Registration for UK Limited Company as an Amazon Seller

Feb 26, 2023 | Business, E-Commerce, USA Accounting

Does VAT compliance as a non-UK Amazon merchant overwhelm you? Let this guide help you understand more about VAT registration for UK limited company and its significance to your e-commerce business. 

A Guide on VAT Registration for Amazon Sellers with Non-UK Directors

Being on the world’s biggest online marketplace allows you to reach more customers from different markets. And when you expand to the UK as an Amazon seller, among the most important to understand is VAT registration.

Registering for VAT in the UK as a non-resident director may seem overwhelming, but it doesn’t have to be when working with a professional from Sterlinx Global. Ease the confusion with a few important things to know. 

The Importance of VAT

VAT, or value-added tax, is levied at every stage where value is added, starting from production to the point of sale. In the UK, registered entities collect and remit VAT to HM Revenue and Customs (HMRC).   

VAT registration is a legal requirement for businesses with total VAT taxable turnover above £85,000 for the last 12 months or who expect to exceed the threshold in the next 30 days. Bear in mind that UK VAT is only applied to your sales in the UK.

Even if your forecasted sales are below £85,000, you can still choose to be VAT-registered voluntarily. One of your obligations would be to pay HMRC any VAT you collect starting from your registration date.  

If you’re a foreign Amazon merchant selling in the UK market, know that you must register for VAT regardless of turnover. Otherwise, you will be penalised for non-compliance. 

Besides being mandatory, being VAT registered promotes good business relations.When you have commercial clients, they usually ask for a VAT invoice on their purchases so they can claim input tax. But if you’re not VAT registered, some of your customers may take their business elsewhere.  

VAT registration can also help improve your brand image. It makes your business look more legitimate and credible than non-registered ones since they appear to run small operations because their turnover did not breach the compulsory limit. 

As soon as you are over the threshold, you must register for VAT within 30 days. Failure to do so results in penalties from HMRC, the amount depending on VAT due and the extent of delay in registering. 

Why Amazon Pushes for VAT Registration

When you’re a merchant on Amazon, the platform encourages you to be registered for VAT; otherwise, they may only give limited access to your Seller Central account. They often send notifications about it, and once you receive these messages, you may be required to register for VAT. A Sterlinx Global advisor can say whether you must be UK VAT registered.

How does Amazon know that you have to register for VAT? The online marketplace uses artificial intelligence to predict when a seller will most likely go over the turnover threshold based on its sales history. 

Suppose your gross sales for six months are already £50,000. Amazon forecasts a steady increase in sales for the next six months After twelve months, you would have exceeded the threshold. In anticipation, the platform advises you to apply for a VAT number for your expected taxable turnover. 

There are two reasons behind Amazon’s push for registration. Firstly, they have a legal responsibility to HMRC to ensure that all sellers in the UK market exceeding the threshold should be charging VAT on taxable products.

Secondly, the marketplace wants Amazon sellers to avoid disruptions in their operations after breaching the £85,000 limit on non-taxable sales. If you opt to do voluntary VAT registration before your business reaches the threshold, you have one less worry and can focus more on operations. 

Who Is a Foreign Director to a UK Limited Company?

A foreign director is a non-UK resident based overseas who holds a position in a limited company established in the UK. You would be one if you formed and structured your Amazon business as a limited company rather than a sole proprietorship. 

Although classified as a foreign director and living outside the UK, you are still responsible for UK VAT and taxation compliance for your company. That includes applying for a VAT number, paying taxes due, and filing the relevant returns on time. Moreover, you must also meet any additional requirements from HMRC and Companies House. 

VAT Registration for UK Limited Company: How Difficult Is It to Register for VAT?

VAT registration as a foreign director can be complicated as some of HMRC’s terms may be hard to understand. Although the tax authority has a user-friendly web portal called the Government Gateway, navigating it yourself can prove confusing.

To create an account, you must input the appropriate information about your limited company and yourself. You will need an active email address and two-step-factor authentication for security purposes. While you can follow the instructions on-screen to proceed with the registration, know that a few terms may require further clarification. 

Confirm that the information you provide to HMRC is correct at the onset. Fixing incorrectly input details may be challenging or subject to penalties, which is why you must ensure accuracy. 

VAT Registration Assistance

If you’re unfamiliar with the VAT registration process, including the correct codes and terms, it’s best to seek assistance from a qualified tax agent or advisor. They can register your e-commerce business on your behalf but may need more information if HMRC makes a request.

First, you must provide your tax identification number from your home country, which HMRC will record in their system. Secondly, you have to submit proof of identification, such as a copy of your ID or passport. You also need to show the UK address of your business, as evidenced by a rental or lease agreement or a mortgage statement.

In addition, HMRC may also require a copy of your birth certificate fully translated into English. 

The above information may have changed by the time of publishing. To ensure you get up-to-date regulations, speak to a qualified tax agent or representative based in the UK. 

Work with a professional from Sterlinx Global to handle your VAT compliance needs as a non-UK resident director, so you can focus on growing your business instead of worrying over the minute details of VAT registration.  

Frequently Asked Questions about VAT Registration

  • When do I need to register for VAT? 

    Ideally, you should opt for VAT registration before doing business in the UK, particularly with foreign companies. But if you’re already running a full operation of your Amazon store, consider applying for a VAT number even before meeting the threshold to minimise inconvenient disruptions.

  • What happens after VAT registration?

    Whether you register on your own or through a tax agent, you will receive a 9-digit VAT number with a GB prefix. This number is specific to your business, and you must include it on all issued invoices. Should your registration be successful, you will get information about performing your first VAT return and payment.

  • Once registered, how much do I charge for VAT?

    The standard VAT rate in the UK is 20% for most goods and services. There is a reduced rate of 5% in certain categories and an exemption in some. It’s best to consult a VAT specialist from Sterlinx Global to know the correct rate you should include in your invoices and collect from your customers.

Bottom Line

If you’re an Amazon seller planning to expand or already selling in the UK market, it’s essential to have your VAT registration done as early as possible. There are many benefits to doing so, especially in the long term. 

If the task seems daunting, you can seek assistance from an expert—Sterlinx Global has a team of VAT specialists that can help you from start to finish. Apart from their professionals, they also have a tax community forum where you can post questions and a YouTube channel tackling various tax issues.

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