How A2X handles VAT in all European Amazon marketplaces
Estimated reading time: 7 minutes 30 seconds.
Anyone who runs an online store will know that the beauty of ecommerce is its capabilities are limitless.
It’s a fantastic way for retail stores of any type and size to reach a new community of customers – enabling you to expand your sales worldwide without the extensive costs of setting up a brick-and-mortar store.
Ecommerce has leveled the playing field, making it possible for small businesses to compete with corporate giants on an international stage.
But that doesn’t necessarily mean business fundamentals have changed, and running an ecommerce store has many complexities that a physical store won’t ever encounter.
Being able to sell globally is wonderful, but it does come with certain accounting challenges that, without the right systems, can be extremely time-consuming to manage.
For UK ecommerce sellers (and UK ecommerce accountants), one of the biggest accounting considerations you’ll face will be VAT.
At A2X, we love ecommerce. We’ve been working with ecommerce systems for more than 10 years.
We have experience selling internationally, and we were among the first to work with Amazon FBA in the UK. We’ve encountered first-hand how many hours can go into exporting and manipulating your Amazon transactions – and we’re here to tell you that there is an easier way.
Whether you’re in the start-up phase or a seasoned professional, take a look at how A2X can help Amazon and Shopify sellers in the UK accurately manage VAT.
A Brief Rundown of VAT
Around the world, sales tax has different labels, and how it’s charged and collected also changes from country to country. In the UK and Europe, it’s called a value-add tax (VAT).
It’s a general tax that’s applied to all commercial activities involving the production and distribution of goods. It’s paid for by the customer when a purchase is made – but it’s your job as a seller to collect it for the government.
VAT is charged as a percentage of the sale price. Under EU law, each European country can set its own VAT rate – anywhere from 15% up. Some countries will also change the rate based on the product you’re selling.
The UK is no longer subject to EU regulations post-Brexit, so if you have nexus with the UK only, you need to ensure you’re up to date on its new requirements. We talk more about this in our Amazon VAT guide.
If you’re a VAT-registered business, you’re allowed to deduct the VAT you’ve paid from what you’ve collected. The resulting total is what you pay to HM Revenue and Customs (HMRC).
Once your UK ecommerce business reaches an annual taxable turnover of £85,000, you are legally required to register for VAT. This means you need to start charging and collecting the right amount of VAT on all sales made in the UK and remit any owing VAT to HMRC when it’s due.
On top of that, if you’re using Amazon’s Pan-European FBA network to sell your products to European customers, you may also be liable to charge and collect VAT in those countries too.
Each EU country has a distance-selling sales threshold before you must register for VAT. In practice, this means you could be required to collect VAT in multiple countries and file multiple VAT returns. That’s a lot of number-crunching – but there is a silver lining.
How A2X Handles VAT in Your Accounting System
Both Amazon UK and Shopify can be set up to automatically collect VAT on your sales, at the right percentage, so you don’t have to worry about being out of pocket.
Then, if you’re using cloud accounting software like Xero, Sage, or QuickBooks Online, the process of filing a VAT return is relatively simple.
However, your accounting software requires accurate financial data to run a correct VAT return – even more so if you’re filing in more than one jurisdiction. That’s why you need a clear understanding of your sales numbers right from the start, so you know how much money is owing to each tax department.
A2X for Amazon
Recording your Amazon settlement payments as gross revenue does not take into consideration the range of service fees (storage, fulfilment, removal) and taxes (VAT included) that need to be accounted for as expenses.
By doing that, you’re painting an unrealistic picture of what your actual profit is.
This is where A2X for Amazon will simplify your Amazon accounting so you can file your VAT returns with confidence.
- When Amazon creates a new settlement file, A2X automatically fetches it, crunches the numbers, and generates a summary of revenue, expenses, and other transactions.
- Using this information, A2X then generates invoices or journal entries from each settlement and posts them to your cloud accounting system.
- You can then set the ledger accounts and tax rates that apply to each type of transaction.
- When settlement payments from Amazon appear in your bank account, you can easily reconcile these deposits with the A2X settlement postings.
A2X for Shopify
Selling your products across more than one ecommerce platform? A2X also supports Shopify sellers.
It doesn’t matter what ecommerce platform you’re using because our multi-channel plans enable you to get the most out of A2X.
A2X for Shopify categorises all your transactions and sends them to Xero or QuickBooks in tidy summaries that match your Shopify Payments – meaning you have accurate financials 100% of the time.
A2X for Shopify will:
- Save you hours of reconciliation every month by automating the reconciliation process.
- Allow you to grow your e-commerce business quickly by increasing transaction volume with ease.
- Enable accurate, up-to-the-minute financial data you can always rely on.
UK Ecommerce Accountants Use A2X Too
Don’t just take our word for it – some of the UK’s top ecommerce accountants swear by A2X. They all specialise in VAT – and they’re also A2X partners.
AVASK Accounting and Business Consultants
A dynamic team focused on providing its clients with innovative and proactive solutions to help improve their businesses
- Provides VAT services (among many other accounting services).
- Specialises in helping ecommerce businesses expand into UK and EU marketplaces via Amazon and other ecommerce channels.
Provides specialist accountancy services for businesses selling through online platforms including Amazon.
- Has been using A2X since 2015.
- Accountancy practice based in the UK offers cloud accounting worldwide.
- Specialises in Amazon sellers and online retailers and has the expert tools and techniques to help you get the most out of your business.
Specialises in all accounting matters including VAT solutions for businesses.
- Great for start-ups, rapidly-growing ecommerce businesses or retail stores looking to branch into the digital world.
- Focuses on making the best use of technology to reduce repetitive tasks and fully embraces applications like A2X, Xero and QuickBooks.
Experts in technology and systems along with the accounting you need to manage your business.
- Works with UK-based customers with a passion for Shopify and/or Amazon with Xero.
- Speciality is streamlining your systems and processes in your multi-channel stores with up-to-date info on your business performance.
Helps businesses realise their financial potential using cloud-based products to review real-time business data from anywhere in the world.
- Avid users of A2X to ensure bookkeeping is kept up to date on a real-time basis so business owners can make business decisions quickly.
- Has been welcoming ecommerce SME that Xero in on the Lodestar family since 2016.
Creates freedom for online sellers through stress-free business finances.
- Serves UK-based Amazon FBA and Shopify sellers using Xero.
- 2019 Xero Bookkeeping Partner of the Year.
- Helps customers integrate A2X and get their business finances squared away in Xero.
Xero proficient, helping sole traders and companies with A2X set-ups, UK tax compliance and planning.
- Highly experienced with Shopify merchants and Amazon marketplace sellers.
- Extensive experience in Amazon accounting, from single marketplaces to international sellers with VAT/GST obligations in multiple countries.
A2X for Accountants
A2X isn’t just designed to make ecommerce selling easier. Specialist ecommerce accountants worldwide are using A2X to automate their clients’ accounting and reconciliation.
- Link to Amazon Marketplace or Shopify store. Request access to your clients' ecommerce platform or invite them to connect to A2X.
- Link to Xero or QuickBooks. A2X connects your clients' Amazon Marketplace or Shopify Store to their accounting systems in minutes. The A2X team can help you or your clients get set up.
- Load and summarise ecommerce transactions. Your clients’ Amazon Marketplace or Shopify store transactions are loaded into A2X and grouped to match the pay-outs to the bank accounts.
- Reconcile books with ease. Your clients' bank deposits can be easily reconciled with the numbers A2X posts to their accounting systems. You can be confident everything will match to the cent.
If you’re a UK ecommerce accountant interested in becoming an A2X partner, get in touch with the A2X team.
A2X: The Trusted Solution for UK Accounting
With a just few clicks, you can integrate A2X with your accounting software, and have your Amazon settlements and Shopify pay-outs reconciled to the cent, every time.
With an accurate recording of your ecommerce sales in your accounting system, A2X makes it easy for you to stay on top of VAT obligations – and you can relax knowing that your books are set up properly to handle VAT, both now and in the future.
Also on the blog:
- The A2X Sales Tax Hub
- Ecommerce Accounting and What Makes It So Different
- Find an Ecommerce Accountant
- VAT Obligations for Amazon Merchants
- Amazon FBA in the UK and A2X
- UK Ecommerce Accounting Software for Amazon FBA and Shopify
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