Imagine working hard to build your e-commerce business, only to wake up one day and find your funds frozen, unable to withdraw your earnings or move inventory from warehouses. This nightmare scenario is becoming reality for numerous UK-based Amazon sellers due to new VAT withholding policies.
The VAT Withholding Scheme: Is Your Account at Risk?
Since September 1, 2023, Amazon has begun implementing VAT withholding services for certain UK-registered seller accounts. More concerning, the marketplace is progressively expanding this program, with most UK-registered sellers (those exceeding the £85,000 tax-free threshold) expected to be included.
How to check if your account is affected:
Log into your Amazon Seller Central and review your VAT settings. Accounts linked to HMRC (UK tax authority) addresses will automatically be subject to withholding. Even accounts marked as "non-UK company" aren't safe—they may be added to the program at any time.
Frozen Funds: Sellers Share Their Ordeal
Numerous sellers report having their funds frozen without warning, creating severe operational challenges. Many received emails demanding immediate documentation including:
- Proof of actual business operations at the provided UK address
- Evidence of directors' residency
- Documentation of any employees
The sudden documentation requirements have left many sellers scrambling, with frozen accounts threatening their business viability.
Amazon's Documentation Requirements: Proving Your UK Presence
Amazon requires concrete evidence that sellers' UK addresses represent genuine business operations, not virtual offices or mail forwarding services. Acceptable documentation includes:
- Lease agreements with payment proof
- Employee records with PAYE references
- Council tax bills
- Utility bills
- Purchase receipts
- Directors' National Insurance numbers
Important notes: Amazon explicitly rejects virtual office addresses, and all documents must be in English with visible dates and business identification.
Protection Strategies: How to Safeguard Your Business
Facing these challenges, sellers should consider these protective measures:
1. Verify Your Account Status Immediately
Check your VAT settings in Seller Central to confirm whether you're already in the withholding program or marked as "non-UK company."
2. Prepare Documentation in Advance
If you receive Amazon's verification request, respond promptly with compliant documents to avoid frozen funds.
3. Consider Inventory and Cash Flow Protection
Accounts marked "non-UK company" should consider moving inventory and withdrawing funds proactively, as some sellers report being locked out during 14-day tax reviews.
4. Utilize the Tax-Free Threshold
Sellers below £85,000 in sales can operate without VAT registration, but must comply immediately upon crossing this threshold.
5. Consult Tax Professionals
Given the complexity, professional tax advice may prove invaluable for navigating these requirements.
Key Questions Answered
Why was my account withheld despite having a UK company VAT certificate?
Amazon makes determinations based on current account information, not historical documents. Your Seller Central status overrides previous certifications.
Can I change my VAT address from HMRC to a UK company address?
For Chinese-owned UK companies with directors residing in China, this change proves extremely difficult. The process typically requires 3-4 months and often fails without genuine UK operations.
Is it safe to continue operating as a "non-UK company"?
Extreme caution is advised. Multiple sellers report sudden restrictions on fund withdrawals and inventory movement, often with minimal warning.
Staying Compliant in a Changing Landscape
These policies continue evolving, requiring sellers to monitor Amazon's official updates regularly. Professional guidance remains essential for navigating these complex tax requirements while protecting business operations.