Amazon FBA and UK VAT: are you sure you are UK established?

You have a UK limited company, a UK company number, a UK registered office address and stock sitting in a Midlands fulfilment centre. You told Amazon you were UK established, because on the face of it you obviously are. Then the marketplace starts charging 20% on your sales, your margin disappears overnight, and HMRC wants a conversation. So what actually makes a business UK established for VAT, and why does a UK company not settle it?

Why does this one word matter so much?

Because it decides who charges the VAT on your sales.

Where goods are already in the UK when they are sold, and the seller is not established in the UK, the online marketplace becomes the deemed supplier. It accounts for the VAT on that sale, at any value. There is no £135 threshold and no small seller exemption.

For a business running on thin margins, that is not an administrative change. It is 20% of revenue moving out of your control, plus a backdated liability for everything sold before the correction.

What makes a business UK established?

HMRC’s test has two limbs, and you need to satisfy one of them.

Either the place where essential management decisions are made and central administration is carried out is in the UK, or the business has a permanent physical presence in the UK with the human and technical resources to make or receive taxable supplies.

Now the part that catches sellers out. HMRC states that a company incorporated in the UK does not by itself constitute a UK establishment. Nor does a third party UK address.

The marketplace operator guidance lists what is unlikely on its own to be enough:

• being incorporated in the UK
• a registered office, serviced office or virtual office
• an address in the business name

Warning! Read that list again. A UK limited company with a company formation agent’s registered office, directors living overseas, no UK staff and no UK premises is very likely not UK established, however British it looks on Companies House. Stock in a fulfilment centre does not fix it either, because the warehouse is Amazon’s resource, not yours.

What is the registration threshold for a non established business?

There is not one. It is nil.

A non established taxable person must register for VAT if it makes taxable supplies in the UK of any value. The £90,000 threshold that applies to established businesses does not apply at all. Notification is due within 30 days of the first UK taxable supply, and registration takes effect from that first supply.

Example. A seller incorporates a UK company, ships stock into a UK fulfilment centre and turns over £70,000 in its first year. Believing it is under the £90,000 threshold, it does not register. In fact, if it is not UK established, it was registrable from its very first sale. The output VAT on £70,000 of standard rated sales is £11,667. Because the price was set without VAT in mind, that comes straight out of margin, and interest and penalties follow. The threshold the seller was watching never applied to it.

What happens when a marketplace decides you got it wrong?

Marketplaces are now required to check, and they carry real risk if they get it wrong, which is why they act quickly and rarely negotiate.

An operator must keep evidence that it took all reasonable steps to determine a seller’s place of establishment. HMRC’s stated position is blunt: if the marketplace does not apply the liability correctly, HMRC will assess the marketplace for the outstanding VAT unless it can show it took all reasonable steps.

The checks HMRC suggests include the UK principal place of business, whether the VAT number matches the legal name on HMRC’s checker, Companies House registration and whether directors are UK resident, UK bank and payment provider data, credit checks, UK IP address or geolocation, and UK phone numbers.

Note. Because the marketplace is the party HMRC assesses, its incentive is to reclassify you and start charging VAT immediately rather than to hear your argument. Expect the change first and the conversation afterwards.

HMRC also has joint and several liability powers over marketplaces. It can serve a notice putting a platform on notice that it may be liable for a specified seller’s future VAT, normally giving around 30 days to remove the seller or secure its compliance. Where revenue is at risk, HMRC says it may act swiftly and without warning.

Warning! There is a point worth being straight about. HMRC’s published guidance does not say that a seller who wrongly claimed UK establishment takes the liability off the marketplace. The marketplace remains the assessable party unless it can show reasonable steps. Separately, you face backdated registration from your first sale, assessment, penalties, and removal from the platform. Do not assume a false declaration only creates a problem for the platform.

Can I become UK established?

Sometimes, and it is a commercial decision rather than a paperwork exercise.

Establishment turns on where management decisions are actually taken and whether there is a permanent physical presence with human and technical resources here. Genuinely relocating decision making, employing UK staff and running the business from real UK premises can change the position.

What will not work is a virtual office, a nominee director who takes no decisions, or a mail forwarding address. The marketplaces screen for all three, and the consequence of getting it wrong is backdated rather than forward looking.

What is coming next?

On 23 June 2026 HMRC opened a consultation proposing to extend marketplace VAT liability to sales facilitated for UK established businesses too, with mitigation options including a minimum platform threshold at £90,000 or lower. It is a consultation, not law, and no implementation date has been set. It closes on 18 August 2026.

If it proceeds, the establishment question becomes less decisive, because the marketplace would account for the VAT either way. That is some way off, and it does nothing about historic exposure.

What should you do next?

Answer three questions honestly, in this order.

Where are your essential management decisions actually made? Not where the company is registered. Where the decisions happen.

Do you have UK human and technical resources of your own? Amazon’s warehouse is not yours.

What did you tell the marketplace, and on what basis? If the declaration was made without advice, review it now rather than when the platform reclassifies you.

If you are not established here, the exposure runs from your first sale, and coming forward voluntarily is treated very differently from being found. Our team includes a Chartered Tax Adviser with direct experience inside HMRC, which matters because the outcome depends heavily on how a disclosure is framed and what evidence exists when it is made.

If you sell into the UK through a marketplace, speak to a Chartered Tax Adviser before the platform makes the decision for you. There is more on our E-Commerce and Online Retail and Non-UK Residents and Companies pages, and a real case in our tax saving case studies.