A2X Asks UK Accountants: How Can Amazon Sellers Prepare for the UK’s MTD?
Estimated reading time: 8 minutes 30 seconds.
MTD, or Making Tax Digital, impacts all aspects of the way Amazon sellers in the UK account for VAT to the HMRC.
Despite the initial and rather urgent push for sellers to start their transition to compliant digital systems early, many delayed. This means that many UK Amazon sellers are still trying to catch up and understand this shift to MTD.
When I first planned to write this blog, I never imagined that I’d actually get to be in the UK as it approached this transition. It gave me a great advantage and allowed me to speak to accountants about how Amazon sellers could prepare for the shift to MTD.
In August, seven months before MTD became an official reality, my feet were on the ground in Old Blighty and I was able to get a fresh perspective from a few of our A2X Experts.
Which Accounting Software is Compatible with MTD?
The UK’s HMRC committed to launching a new, fully online, digital VAT tax processing by the 1st of April 2019, which fell two days after Brexit (on 29 March, 2019).
These new MTD laws require full, digital accounting that ties directly into the seller’s accounting systems. Amazon sellers now need to be using digital record-keeping to generate and send updates directly from their software to HMRC. Only compliant software providers are accepted by HMRC.
To this end, HMRC has tested multiple beta pilot systems with a limited number of “provider” software companies, Xero and Intuit being among these.
Digital Tax Awareness and Strategy
“Awareness” and “strategy” were the watch-words from UK firms I spoke with at the time.
Although this transition to a full digital bookkeeping and accounting process may have at first appeared to require only a few simple steps, there have been many involved decisions for most sellers.
For starters, there have been tax-technical issues. There are ongoing concerns about the software choices, challenges in updating desktop versions to online and the reevaluation of internal tracking systems.
For many, it has also meant a complete shift to alternative accounting services better equipped to handle ecommerce and MTD. As with any other business systems changes, there have been costs and fees incurred, stressing many a business budget.
Did You Delay the Shift?
Amazon sellers who didn’t prioritize the shift in the provided timeframe have invariably found the changeover more difficult.
During my discussions with our expert accountants for Amazon sellers in the UK, they had all recommended the same thing: That businesses who are VAT registered made the change early before the inevitable last-minute rush.
This was in part due to the fact that for many businesses with year-end in March, their first digital VAT filing directly from software was due to happen on June 30th 2019 - just a matter of months after the introduction to MTD - creating a collision of essential accounting elements in the midst of massive change.
Donna Torres, director of SMB at Xero UK summarized Xero’s advice to sellers at the time, advising:
“Decide about your accounting software soon to avoid any potential complications that could arise from getting set up.”
Wendy Andrews, VAT Director at Bishop Flemming, one of the top 30 accounting firms in the UK, echoed this sentiment, telling Amazon sellers to:
“…convert to one of the top (software) candidates sooner so the last part of digital reporting integration with HMRC is just one step.”
During this period, I also reached out to Chloe Waight, Director of Lodestar Accounting, a woman-owned, small firm based in Staffordshire.
Her advice was clear: Sellers needed to move to digital software as soon as possible.
Leaving it until the March deadline would be a mistake. In the UK, as anywhere in the world, there are other deadlines for tax such as personal tax returns.
Ms Waight pointed out that most accountants would be focusing on other areas beside MTD during the conversion, meaning that after the January deadline for personal tax, it would be far too late to start thinking about getting converted.
This would create serious stress and pressure for sellers and accountants alike.
Registering for VAT Payments Under MTD
Previously, Amazon sellers based in the UK had to be registered for UK VAT if annual turnover was £85,000 or above. Once a seller passes the threshold, they then have 30 days to register.
Once MTD was introduced, all Amazon sellers with sales over the threshold who trade in the UK, regardless of their country location, had to register for digital VAT reporting.
HMRC’s Rollover Year
If a seller’s turnover is above or rises above the threshold, they must comply with HMRC’s MTD. The UK system of a rollover year or “12-month look-back” makes timely VAT registration imperative.
Sellers who pass the annual threshold have their VAT automatically backdated to the beginning of that current month. This has meant that sellers have to be able to monitor their gross sales in real-time, representing a challenge for many.
Thankfully there’s A2X for Amazon to simplify MTD.
With a few clicks, A2X users can record their sales to Xero or QuickBooks online. This makes regular monitoring of gross sales in relation to the VAT threshold really easy.
Quickbooks desktop for MTD and Xero are some of the best tax software available in the UK. They make the entire process of real-time tracking uncomplicated and quick - especially when linked with A2X.
The process to then submit the VAT return to the HMRC is further simplified by mapping VAT codes in A2X.
For more information on how to configure VAT in A2X, see our A2X support center articles on VAT.
MTD Checklist For Amazon Sellers
Are you an Amazon seller in the UK marketplace? Unsure if MTD is mandatory for your business?
Here’s our checklist for sellers with a UK turnover of £85,000 plus:
- Track your gross sales rollover threshold.
- Get VAT registered.
- Use Xero or QuickBooks Online.
- Use A2X to crunch the Amazon Sales and Fees.
- Have an MTD-knowledgeable accountant.
- Understand what VAT rates apply to Amazon transactions and product types.
- Use A2X to help monitor product profitability.
- Have your HMRC unique digital account set up.
- Ask your accountant for advice.
Disclaimer: These are recommendations from A2X based on research. Seek advice from your accountant to ensure full compliance with the HMRC MTD laws.
Sellers who are currently VAT-registered, or anticipate they might pass that threshold, should discuss digital VAT-compliance with their accountant. You may also like to read this online support guide.
Donna Torres strongly suggests discussing MTD with an accountant:
“An accountant can advise you on how […] to digitise your paper-based system. They’ll also identify the best software for your needs and walk you through how to take advantage of going digital.”
Real-Time Accounting for Amazon Sellers in the UK
If the shift to MTD has caused you stress, you’re not alone.
However, you’re hopefully now on the path to discovering that moving your venture into real-time has the potential to increase business efficiency.
Through more accurate and up-to-date tracking, solid metrics can guide you towards stronger, more agile business decisions.
Chloe Waight backs this, saying:
“I’m a big believer in real-time - to be able to monitor the profitability of the business and make decisions on the future of the business. I think that’s really important for Amazon sellers because it’s such a fast-moving environment. They’ve got to make decisions about whether they need to reorder certain lines of inventory quite quickly, and to see whether that item is profitable or not.”
For sellers who made the shift from paper or spreadsheet-based to an online solution, this has been a huge leap in how they operate. It has also been a steep learning curve with much to digest and integrate since April 1st, 2019.
If you’re still struggling with the MTD changeover, Chloe Waight offers this advice:
“Find a competent firm to help. It’s daunting to trust a new kind of accounting and a new accounting firm. The personality of accounting firms makes a difference. It’s great to have a personal meeting to see a demo of the software and other services.
More regular services, not just at the end of year, can actually save business owners money and position them for strategic growth. We’re no longer just number crunchers. Accountant firms are offering more services and building more client relationships with frequent, ongoing business advice.”
To find a trusted accountant for Amazon sellers in the UK, see our directory of A2X accounting partners.
Moving Forward With MTD
There really are so many far-reaching implications of MTD. HMRC has been modelling the new system as it goes, and the accounting profession has had their hand’s full advising and helping businesses navigate the new system.
The UK Amazon marketplace is second in size to the US marketplace. So for the seller who has a gross turnover near or just below the current UK threshold of £85,000, watching the current monthly metrics is crucial for ensuring timely VAT registration.
Across the board, this new way of digital reporting means all owners can now gain real-time awareness of their finances. The digital accounting environment also represents an opportunity for a paradigm shift, away from year-end check-ins and towards an ongoing financial dialogue.
From my time in the UK, I was able to better understand that the seller and accountant dynamic plays a key role in this transition to the digital age of the UK retail sector.
Through my meetings with these experts, I came away with the strong impression that any Amazon seller would benefit from the intelligent advice, guidance, and savvy that had been shared with me during these interviews.
This blog aims to make that knowledge base accessible to all.
I hope that wherever you are at with MTD, reading this has made it easier to see and understand the benefits of going digital and how A2X can support your business.
I wish all those now navigating MTD the best of British moving forward!
Also on the blog:
- Changing the Landscape of Tax Law
- Ecommerce Accounting Principles
- The Impacts of Brexit and COVID-19 on the UK Ecommerce Market
- Find an Ecommerce Accountant
Ready to get started?
Save time, work smarter and get reliable Amazon and Shopify financials you can trust, in a matter of minutes.