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The ultimate guide to staying VAT compliant for UK Shopify, Amazon & Etsy sellers
Selling on Shopify, Amazon, or Etsy in the UK requires careful VAT management. As soon as your business reaches the taxable turnover threshold, you have to register for VAT and submit accurate returns. Maintaining VAT compliance for your business helps avoid fines.
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Who needs to register for VAT
You must register for VAT if your total taxable sales in the UK exceed £90,000 in the previous 12 months. You also need to register if you import goods into the UK or hold stock in the UK or the EU. Businesses can register voluntarily even below the threshold to reclaim VAT on expenses. You must also consider registration if:
- You sell physical or digital goods online
- You have already voluntarily registered for VAT
- You sell to or store goods in EU countries
It is crucial to monitor turnover across multiple platforms. Sales on Etsy, Amazon, and Shopify all contribute to the threshold.
VAT rules for online sellers
Once VAT applies, you must:
- Register with HMRC
- Charge VAT on eligible sales
- Keep digital VAT records
- Submit VAT returns on time
- Pay any VAT owed
Making Tax Digital (MTD) requires businesses to keep records in HMRC-recognised software and submit returns digitally. Paper records or simple spreadsheets are no longer compliant.
Challenges for marketplace sellers
Online sellers face unique challenges. Many sell across Shopify, Amazon, and Etsy simultaneously. International sales add VAT complexity. Although marketplaces occasionally collect VAT on your behalf, you are still ultimately responsible for reporting. Additional responsibilities arise from dropshipping or multi-location fulfilment. Errors may result in:
- HMRC fines
- Deadlines that were missed
- Inaccurate VAT returns
- Reclaimed VAT that was lost
Accurate reporting requires an understanding of each platform’s regulations.
Common VAT traps
Assuming the marketplace handles VAT
Amazon and Etsy may collect VAT for some sales, but you still must report all income correctly. Failure to do so can result in penalties.
Poor digital records
Ignoring EU sales
Late filing
Shopify VAT requirements
- In the settings, enter your VAT number
- Allow VAT to be charged on qualified sales
- Provide business clients with VAT invoices
- Transactions should be routinely exported for documentation
Amazon VAT requirements
- Compare sales records and marketplace VAT statements
- If you use Fulfilment by Amazon in the EU, think about registering for VAT
- To comply with MTD, keep accurate digital records
Etsy VAT requirements
- Download monthly statements and enter Etsy-collected VAT in their records
- Apply VAT to qualified sales to UK consumers and businesses
Cross-Border Sales and VAT compliance
Shipping goods to EU customers requires awareness of:
- IOSS for low-value consignments under €150
- VAT registration in EU countries where inventory is stored
- Customs declarations and import VAT
UK VAT returns must still include all UK sales, EU sales handled under IOSS, and any imports. Accurate digital records simplify cross-border compliance.
Keeping VAT compliance under control
The following actions are necessary for efficient VAT compliance:
- Monitor monthly turnover against the VAT threshold
- Keep thorough digital records of all your purchases and sales
- Use the appropriate VAT rate when purchasing goods
- Send in returns on time
- For accuracy, use software that is compatible with MTD
- Examine reports frequently to find mistakes
Adopting a structured process ensures you remain compliant across Shopify, Amazon, and Etsy.
Tools for VAT filing & compliance
- HMRC-recognised software helps online sellers file VAT returns digitally. These platforms reduce human error and save time when managing multiple sales channels. They also help ensure VAT records meet MTD requirements without requiring complete accounting systems.
- Software can consolidate totals from Shopify, Amazon, and Etsy, calculate VAT due, and securely store records. It is simpler to file VAT returns and deal with any HMRC checks when you have organised, digital records.
Final advice
Key takeaways for online sellers:
- Register for VAT if your sales pass the £90,000 threshold
- Keep digital records that meet MTD rules
- VAT filing by the deadlines
- Know how VAT works for Shopify, Amazon, and Etsy
- Monitor global sales and use IOSS as needed
By taking these actions, you can recover VAT, avoid trouble, and maintain the smooth operation of your company. You can concentrate on managing your store rather than worrying about compliance when your records are clear.
Frequently Asked Questions:
Your Questions – Answered ,We’re here to help you with anything VAT-related.
1. Do online sellers in the UK need to register for VAT even if they sell on platforms like Amazon or Etsy?
Yes. If your total taxable sales in the UK exceed the VAT threshold, you are required to register for VAT. This applies whether you sell through your own website or via third-party platforms like Amazon, Etsy, or Shopify.
Voluntary registration is also an option for smaller sellers, allowing you to reclaim VAT on business expenses, which can improve cash flow. Keep in mind that marketplaces do not automatically handle VAT compliance for you.
For example, Etsy collects VAT on seller fees but not on product sales, meaning you are still responsible for reporting and submitting the correct VAT returns. Staying aware of VAT obligations helps your business avoid penalties and maintain credibility with customers and HMRC, even when selling across multiple platforms.
2. How can Shopify sellers ensure their store stays VAT compliant in the UK?
Shopify sellers should take several steps to maintain compliance. First, enter your VAT number in the store settings and enable VAT charges for eligible products and regions. Issue VAT invoices to business customers and ensure all sales data is regularly exported and reconciled.
Keeping clear digital records of transactions, including sales, refunds, and expenses, is essential for Making Tax Digital (MTD) compliance. Sellers should also review VAT calculations for each product and monitor turnover against the threshold. Using HMRC-recognised software helps automate submissions and reduces errors.
Regular checks prevent mistakes that could lead to fines or incorrect returns. Following these steps keeps your Shopify store compliant, supports accurate VAT reporting, and allows you to focus on growth rather than paperwork.
3. What are common VAT compliance mistakes online sellers make on platforms like Etsy & Amazon?
Many online sellers make mistakes that can lead to fines or lost VAT claims. One standard error is assuming that marketplaces handle all VAT responsibilities. While platforms like Amazon or Etsy may collect VAT on some transactions, sellers are still responsible for reporting accurately. Poor record-keeping is another frequent issue.
Using spreadsheets or incomplete digital records can create errors when submitting returns under MTD. Sellers also often overlook VAT on cross-border sales, especially if stock is held in the EU. Filing returns late or misreporting sales periods is another risk. Mistakes like these can result in penalties, lost VAT recovery, and time-consuming corrections.
By keeping accurate digital records, understanding each platform’s VAT obligations, and submitting returns on time, online sellers can avoid common pitfalls and maintain compliance across Shopify, Amazon, and Etsy.
4. Can non-UK sellers on Amazon or Shopify still be VAT compliant when selling to UK customers?
Yes. Non-UK sellers must register for UK VAT if they meet the taxable turnover threshold or store goods in the UK. This requirement ensures that VAT is collected and reported correctly on all UK sales. Sellers should also maintain clear digital records of transactions, including sales, fees, refunds, and imports.
Using HMRC-recognised software helps with compliance and simplifies submission under Making Tax Digital rules. Understanding VAT obligations, such as charging the correct rate and issuing invoices, is essential. Non-UK sellers shipping from abroad or holding stock in EU warehouses may have additional registration requirements.
Keeping accurate records reduces the risk of errors, ensures timely submissions, and prevents fines. By planning and using the right tools, non-UK sellers can remain fully compliant when selling to UK customers on Amazon, Shopify, or Etsy.
5. Do I need to register for VAT as a small business selling on Shopify, Amazon, or Etsy in the UK?
If your taxable turnover exceeds the VAT threshold, you must register. For smaller businesses under the threshold, registration is optional but can offer benefits. Voluntary registration allows you to reclaim VAT on business purchases, improving cash flow and reducing costs. It also enhances credibility with customers and suppliers.
Regardless of size, keeping clear digital records is critical for future compliance and audit readiness. Monitoring turnover across multiple platforms, including Shopify, Amazon, and Etsy, helps you know when registration is required.
Voluntary registration can also simplify expansion if your sales multiply. By understanding VAT rules, maintaining accurate records, and using digital filing tools, small businesses can manage compliance efficiently while focusing on growth and operational priorities.