Challenges Of Being a Non UK Resident Amazon Seller in The UK and Ways to Overcome Them
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Amazon marketplace is one of the popular online platforms for both sellers and customers. Due to the pandemic, consumers transitioned to online retail such as Amazon which gives sellers an easy way to get their products to global customers fostering wider market reach.
In 2021, Amazon had over six million third-party sellers on its marketplace. According to Marketplace Pulse research, Amazon adds over two thousand new sellers daily.
To reach other massive audiences, Amazon sellers are tapping into the UK market where it is in the top three most popular international marketplaces among third-party sellers.
As much as expanding your niche to the UK market can be profitable, Amazon sellers must understand the pros and cons of starting a UK Amazon business.
In this article, we will explore the challenges of being a non UK resident Amazon seller and ways to overcome them.
What challenges do non UK resident Amazon sellers face?
Being a non UK resident Amazon seller in the UK comes with specific challenges such as:
VAT obligations
Brexit has introduced additional costs related to VAT and customs charges. Sellers must now navigate these new regulations, impacting their profitability.
UK limited companies must register for VAT if they exceed the VAT threshold which is £85,000 at the moment in the UK, however businesses can voluntarily register for VAT as well even if their VAT taxable turnover is less than the VAT threshold.
When you sell products to UK consumers via Amazon and ship those goods from a location outside the UK, Amazon will automatically collect and pay the VAT to HM Revenue and Customs (HMRC). However, it will be the responsibility of the Amazon seller to file for VAT return so it is important to understand VAT obligations.
Legal compliance
Amazon and other e-commerce platforms must stay compliant with UK tax regulations and legal requirements.
Businesses registered within the UK must comply with corporate tax. Income tax is also a crucial consideration for sole traders and individuals based on annual income.
If you have employees, you’ll need to pay National Insurance contributions on their behalf and Pay As You Earn (PAYE) as well. PAYE involves withholding income tax and National Insurance contributions from employees’ salaries.
Keep up-to-date with any changes in regulations.
Providing proof of address for their registered office address
Amazon may require businesses to provide proof of address documents for their registered office address. Amazon sellers should consider renting a physical office space in the UK to meet Amazon’s requirements.
To verify your proof of business address to Amazon include lease/mortgage statements or utility bills as proof of address.
Communication with Amazon
Dealing with Amazon can be challenging due to their processes and lack of statutory rights for sellers.
Accounting and financial management
Maintaining accurate accounting records and managing finances can be daunting.
Shipping and logistics
Efficiently managing shipping and logistics from outside the UK can be challenging.
Customer service and returns
Providing excellent customer service and handling returns.
Ways to overcome these challenges
Register for VAT
Non UK sellers need to register for UK VAT. If you operate a UK limited company and have it registered for VAT, Amazon will not automatically handle VAT collection and remittance on your behalf. You’ll need to manage VAT payments and returns yourself.
When you sell products to UK consumers via Amazon and ship those goods from outside the UK, Amazon will automatically collect and pay the VAT to HMRC. However, you’re still required to file VAT returns as part of your compliance obligations.
Familiarise with UK tax laws
Non UK Amazon sellers should familiarise themselves with UK tax laws related to e-commerce and international sellers.
Explore options for obtaining a physical address
You can rent a shared office or use a co-working space where you can get a physical address to fulfil Amazon's requirements.
You can appoint a UK director to help you lease an office space or use a business service provider who has office space rentals.
Amazon typically requires a utility bill or other official documents that show your name and address. These documents must be visible and can include: water, electricity, gas, or internet bills issued by the utility company. Rental agreements may also be accepted.
Find an individual in Amazon to assist you
While Amazon primarily defends its own interests, try to find an individual within Amazon who can assist you. Always exercise patience and persistence to foster trust and loyalty as you gradually establish your identity.
Additionally, Amazon’s policies and algorithms change frequently. Sellers must stay informed and adapt their strategies. Perseverance ensures long-term success.
Set up a robust accounting system
The accounting system will help to track sales, expenses, and VAT. It will ensure compliance with tax and VAT returns and accurate financial reports.
Also consider hiring an accountant or using digital accounting tools to ensure compliance and accurate financial reporting.
Partner with reliable shipping companies
Research for reliable shipping companies who operate within the UK or use Amazon’s fulfilment services (Fulfilment by Amazon, or FBA) to handle storage, packing, and shipping.
Monitor shipping costs and delivery times so as to communicate with your customer if the goods might be delivered late to foster transparency.
Respond to customer inquiries promptly
Respond to customer inquiries and address any issues promptly. Try to find if the issue can be solved on time or it might take a while.
Amazon’s review system influences buyer decisions. You need to be patient and maintain excellent customer service to accumulate positive reviews.
Additionally, understand Amazon’s return policies and processes to offer credible communication to your customers before they purchase a product.
How can Icon Offices help me overcome these challenges?
Amazon sellers must comply with customs and border regulations, which can be time-consuming and expensive.
Icon Offices can help non UK Amazon sellers overcome these challenges with our international company formation services. With our simple and easy online process, you will be able to fill in your details as we do all the paperwork and submit them to Companies House.
Additionally, we offer shared offices and serviced offices that come with a rental agreement in your company name. With this, you will be able to provide proof of address to Amazon and start operating your business seamlessly.
Once you start trading, we can help you set up your business bank account. We have partnerships with banks such as Tide and Cashplus where you can get up to £70 cash back once you open a business bank account. With our banking partners in the UK,you can seamlessly open a UK business bank account online without a physical meeting.
We also offer VAT registration service for businesses that meet the £85,000 threshold. You must register for VAT if your company’s total VAT taxable turnover will be more than £85,000 in the next 30-day period. You can also register for VAT voluntarily even if your business has not met the threshold.
We provide VAT registration services to Amazon sellers from around the globe for all types of businesses.
In conclusion, while Amazon offers immense opportunities, challenges are there, but sellers can overcome them. To thrive in the UK market as a non UK Amazon seller, you should learn to exercise patience and perseverance.
For more information on how to effectively navigate these challenges in the UK market, contact us at [email protected].