UK – Amazon: Enhancing VAT Collection Through Deemed Supplier Obligations 

Under current UK VAT rules, Amazon Marketplace is accountable for VAT on supplies made by registered third-party suppliers whose place of business or establishment is outside the UK. Under the deemed supplier rules, Amazon, as well as other e-commerce marketplaces that facilitate supplies to UK customers, are responsible for proper VAT collection and remittance. 

The deemed supplier rules aren’t extended to UK-based suppliers. The latest official report issued by Amazon indicates that Amazon has collected more than GBP 6 billion under the deemed supplier regime since the introduction of this tax provision. 

The current deemed supplier regime has its challenges with VAT collection, as the Amazon official report indicates. The commissioned survey found that sales across all platforms exceeded the VAT collection requirement by more than GBP 3 billion, despite the use of various fraudulent techniques. 

One of the most commonly used techniques is developing a system through which the bad actor “claims” to be UK-established, supported by supporting documents, while the reality is the opposite. Amazon and many other marketplaces are having increased difficulty maintaining validated UK VAT numbers in real time and establishing a 100% compliant VAT Validation tool for tax compliance. 

Amazon indicates that modifying the current VAT collection framework for deemed suppliers will be the most efficient and straightforward path, resulting in a significant increase in the VAT collected that will land in HMRC coffers. 

The proposal is built on the premise that e-commerce marketplaces that act as deemed suppliers under the UK VAT framework should be accountable for VAT on all third-party suppliers. 

Will Amazon’s proposal to update the VAT e-commerce framework for marketplaces receive official support? It remains to be seen in the coming months when necessary Budget measures will be discussed.