The information provided here is for general guidance only and reflects our understanding of HMRC’s published manuals. It does not constitute professional tax, legal, or accounting advice. Customers should consult their own accountant or tax advisor to determine the most appropriate treatment for their specific circumstances.
Q: Do I need the Deferred Transactions add-on to stay compliant with HMRC?
No — both the standard settlement method (posting sales when Amazon pays out) and the deferred recognition method (posting sales when they are earned, with deferrals and releases) are HMRC-compliant, provided your accounts are prepared under Generally Accepted Accounting Practice (GAAP).
HMRC states:
“The general principle is that receipts which arise in the course of a trade should be recognised for tax purposes at the time that they are recognised in the trader’s own accounts, so long as the accounts are drawn up in accordance with generally accepted accounting practice, subject to any express or implied statutory rule to the contrary.”
(HMRC BIM40070)
And further:
“GAAP determines in which period revenue receipts and expenses fall, unless there is a specific tax rule that provides to the contrary.”
(HMRC BIM42215)
Q: So why is it an add-on?
The deferred recognition method is not a statutory requirement — it’s an enhanced management reporting approach that better matches revenue and costs in your P&L and introduces deferred income on your balance sheet. Implementing it requires significantly more data processing and infrastructure, which is why we’ve made it available as an optional add-on.
Summary:
Settlement method (default): HMRC-compliant, simpler, based on Amazon payouts.
Deferred method (add-on): HMRC-compliant, more accurate matching of income/COGS, but optional.
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