Kevin Hollinrake, the enterprise minister, has expressed serious concerns and instructed Amazon to release funds currently withheld from numerous merchants.
This directive comes in response to new VAT compliance measures that have left many businesses at risk of bankruptcy. Approximately 400 small-scale traders have sought assistance from Liz Barclay, the small business commissioner after Amazon froze their funds for an extended period.
Mr. Hollinrake stated, “We are contacting Amazon to demand the release of these accounts until they establish a more appropriate procedure. While we recognize the importance of VAT collection, the abrupt manner in which it’s being enforced, particularly during the self-assessment period, is quite inopportune.”
The e-commerce behemoth Amazon, utilized by over 85,000 UK businesses for selling products, has temporarily halted payments to numerous small sellers while it intensifies checks to verify their UK-based operations for tax purposes. Reports include a case where a seller had over £300,000 frozen by Amazon.
The company has been requesting additional documentation from its sellers, many of whom are sole proprietors, to confirm their UK location for VAT purposes.
However, the affected businesses report being stuck in a prolonged state of uncertainty, struggling to meet tax obligations and other expenses, with some fearing potential business failure.
In his communication with John Boumphrey, Amazon’s UK chief executive, Mr. Hollinrake urged, “I strongly recommend that you promptly address this issue and provide support to those affected by these account suspensions.”
Ms. Barclay highlighted the severity of the situation, stating, “We’re overwhelmed with emails from sellers in desperate need of assistance, at risk of losing their livelihoods. Just this morning, a 70-year-old couple, in business for 40 years, can’t pay VAT, taxes, or bills. Others are struggling to feed their families due to frozen accounts, with amounts ranging from £1,000 to £300,000. The mental health impact is alarming. It’s crucial for small businesses to receive prompt payments to continue operations. This issue needs immediate resolution to prevent a tragic outcome.”
Wyatt Harris, an Amazon trader, echoed these concerns, noting, “Many UK sellers are now on the brink of financial collapse.”
Since the beginning of January, numerous Amazon sellers have voiced their grievances on the company’s forums.
According to The Telegraph, retailers convened with representatives from the Business Department and HMRC on Tuesday to discuss their issues.
Amazon has stated that, as per the laws enacted in January 2021, it must collect VAT on sales involving foreign sellers. This process sometimes necessitates acquiring extra details from its users to verify their UK-based status.
A spokesperson for Amazon remarked, “In accordance with UK tax laws, online marketplaces are obligated to collect and remit VAT for transactions with overseas sellers. Consequently, we need to verify all sellers, which might involve additional requests for information to ascertain their location in the UK.
“Our goal is to reduce any disruption this might cause to sellers, and they are welcome to reach out to our support teams for more guidance.”
