This article is written from the prospective of a UK based company who is about to become VAT registered in the UK, or who needs to account for a period prior to becoming VAT registered and a period after.

***DISCLAIMER***
The team at Link My Books are happy to provide users with technical assistance in applying tax rules to their Link My Books setup. We are not Tax Advisors and so our advice and suggestions on the application of tax rules cannot be construed as tax advice. We highly recommend that users seek advice from qualified accountants for their tax compliance.

***END DISCLAIMER***

If you business is about to become VAT registered or you need to set up Link My Books to account for a non VAT registered period and a VAT registered period then the good news is we've made it as simple as possible to manage this scenario.

Follow the steps below and if you get stuck then get in touch with us at support via the blue chat icon at the bottom right of any page.

Step 1 - Setting up for the period before your business became VAT registered

When you connect your Amazon and Xero or QuickBooks accounts to Link My Books, the next step you will be presented with in the guided setup is the Accounts & Tax Rates Wizard.

On step 2 of the wizard you will see this screen:

As shown above, here you need to check the checkbox for "I am not VAT registered in the UK".

Then you will be promoted to confirm your tax rates but since you are not VAT registered we will pre-populate them all with "No VAT" tax rates.

Step 2 - Send all your settlements prior to your VAT registration date to Xero/QuickBooks

Once we have finished processing all your data from Amazon and your settlements are all showing as "Ready to Send" on the Settlement Dashboard then you can begin sending them to Xero or QuickBooks.

Only send the ones that are dated before your VAT registration date at this point.

For a detailed walk though of how to send settlements to Xero or QuickBooks please see this help article.

IMPORTANT: If you have any settlements that span 2 calendar months then you need to send only the part for the month which falls into your "prior to VAT registration period".

Don't click "send settlement" on these ones, instead click the view settlement icon from the dashboard (it's the 🔎 icon in the action column) and then click "Send Invoice" on that part only.

Step 3 - Re-do the accounts & tax rates wizard

Now you can set up your Link My Books account to account for the period after becoming VAT registered.

Visit the Accounts & Tax Rates Wizard again.

On step 2 of the wizard you will see this screen:

This time around select "None of the above - I am only VAT registered in the UK" or tick any EU countries you also hold a VAT registration in if this applies to your business.

Again you will be presented with some suggested tax rates that you need to check with your accountant or tax advisor to ensure they are suited to your business.

Once you have done that move to the next step.

Step 4 - Send all your settlements from your VAT registration date onwards to Xero/QuickBooks

When you change your settings the system will refresh all of your settlements that have not already been sent to Xero or QuickBooks.

Once we have finished refreshing them and your settlements are all showing as "Ready to Send" on the Settlement Dashboard then you can begin sending them to Xero or QuickBooks.

IMPORTANT: If you have any settlements that span 2 calendar months then you need to send only the part for the month which falls into your "post VAT registration period".

Don't click "send settlement" on these ones, instead click the view settlement icon from the dashboard (it's the 🔎 icon in the action column) and then click "Send Invoice" on that part only.

Step 5 - Speak to your accountant about reclaiming the VAT on expenses on all Amazon fees prior to your VAT registration date for a period of 6 months from HMRC.

HMRC say in their guidance around VAT registration that you can backdate claims for reclaiming VAT on goods and services paid before your VAT registration.

How far back can I go?

There’s a time limit for backdating claims for VAT paid before registration. From your date of registration the time limit is:

  • 4 years for goods you still have, or that were used to make other goods you still have
  • 6 months for services

How does this apply to me as an Amazon seller?

One of the main ways you can take advantage of this is by reclaiming the VAT you’ve paid on Amazon’s fees in the 6 months prior to when you became VAT registered.

Until you enter your VAT number in Amazon Seller Central, Amazon will be charging you 20% VAT on all of their fees (if you are a UK based company). That means that all of the following fees have 20% VAT on them:

  • Amazon Seller Fees and Commissions
  • FBA Fees
  • Storage Fees
  • Advertising Fees

The process to reclaim the VAT paid on Amazon fees for the 6 months prior to you VAT registration date is as follows:

Step 1 - Visit Amazon Seller Central and navigate to:
Reports > Tax Document Library

Step 2 - Download all tax invoices for the 6 months prior to your registration date for each of the marketplaces you sell in. Don't forget to get them from your European, North American and other seller accounts too.

Step 3 - Pass these to your accountant and ask them to make a manual journal entry since you have added these into Xero/QuickBooks as "No VAT" and you want to reclaim the VAT paid under the HMRC guidance for reclaiming VAT on expenses for services in the 6 months prior to your VAT registration date.

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