Managing FBA account when staying below VAT threshold
Morning all,
I’m nearing the VAT threshold, but my current margins make me think that VAT registration isn’t worth it for me right now. So, I’m considering the practicalities of keeping my sales below the threshold.
Am I right in thinking I could just close all my listings for a period of time each year? I assume all my stock would go into stranded inventory. And then I could relist?
My concern is, would this have an impact on my IPI/account health?
Also, I’ve noticed recently that the simple ‘relist’ option in stranded inventory doesn’t always work, the items don’t automatically move out of stranded inventory. I’ve had to delete the listing, wait 24 hours in order to be able to use the same SKU, and then create the listing again. So if this happened for all my listings it would be pretty time consuming relisting, so maybe there is a different way to manage it all?
If anyone has any tips about how they manage their accounts to stay below £85k, I’d love to hear them.
Many thanks.
Managing FBA account when staying below VAT threshold
Morning all,
I’m nearing the VAT threshold, but my current margins make me think that VAT registration isn’t worth it for me right now. So, I’m considering the practicalities of keeping my sales below the threshold.
Am I right in thinking I could just close all my listings for a period of time each year? I assume all my stock would go into stranded inventory. And then I could relist?
My concern is, would this have an impact on my IPI/account health?
Also, I’ve noticed recently that the simple ‘relist’ option in stranded inventory doesn’t always work, the items don’t automatically move out of stranded inventory. I’ve had to delete the listing, wait 24 hours in order to be able to use the same SKU, and then create the listing again. So if this happened for all my listings it would be pretty time consuming relisting, so maybe there is a different way to manage it all?
If anyone has any tips about how they manage their accounts to stay below £85k, I’d love to hear them.
Many thanks.
45 replies
Seller_77IcbQKVGdZo0
Your only real answer would be to close your listings to prevent you from selling stock and keeping you under the threshold.
As you say this will increase your stranded stock and you can only have stranded stock for so long before Amazon will remove the stock and send it back to you. As your stock is stranded and not selling it will decrease your sell through and your IPI which could mean that you end up with reducing your capacity limits and you if are tight on limits you may end up paying an excess storage charge.
You will still be paying storage why you are not selling the items so this could impact your profit.
It would be really difficult to manage to be honest to keep you below the limit.
Also as it is approaching Christmas and if you are in a category that gets an uplift for Christmas it would be really difficult to manage and you may need to keep your listings closed for longer.
It is also a blocker for growing your business if you are not VAT registered and on the edge of the threshold.
I have also had trouble getting closed items relisted again and there does appear to be issues with this. I haven’t had to delete an item but it has taken multiple attempts and sometimes only seems to work if you have stock for the item.
Seller_wysYWpJTa9ClB
Thanks for all that Smiley_Guy.
Agree completely with your points re being difficult to manage…it’s giving me a bit of a headache just thinking about it!
Also your point about blocking growth of the business.
I definitely didn’t start this to stop at this point, but the impact of VAT registration will halve my profit (if my maths is right?! I’m switching accountants and will be talking to the new one about this within the week). And I’ll need to be at around 2.5 times my current revenue just to achieve the same amount of actual profit that I’m achieving now. Time is pretty tight right now, so it will be difficult to put the amount of work in to get to 2.5 times my revenue any time soon.
It’s frustrating because until recently I had time to work on the business but growth was hugely restricted by lack of capital. Now that I’ve started a new job which takes up all my previously spare time, Amazon now keep throwing loans at me. So I’ve got access to the capital but not the time to make the most of it anymore. Sigh.
I had the thought that maybe I could stay under for a while, and keep working on increasing my profit margin, then think about VAT reg once my profit margins are higher. I’m currently at around 12% net profit. But I’ve only reached those dizzying heights in the last 2 months so it feels a bit precarious if I’m honest.
Really appreciate your reply, thank you.
Seller_ItBPyqgSfkQsT
@BigBlueBird
Hey,
I’m at a similar cross road, and did some analysis that would be useful for you to decide.
If you’re netting 12% margins, without VAT reg, I’d strongly recommend not registering. As you can expect a 30-40% hit on your profit margins if you continue to generate the same revenues, so like you said you’d need to be doing double the work, for the same amount of profit, in your time restricted situation, work on enhancing your skillset.
I’d remove the products from FBA, I’m assuming you don’t have huge amounts of stock, and spend some time refining your profits, I’d be aiming towards a minimum of 20% Net margin before you decide to grow, you can do this improving your product sourcing methods, creating a higher standard of leads to pursue, and improving your Keepa skills.
Good luck, profit > revenue.
Seller_WDhdcjDfu6Z4g
I’ve no idea what you sell, or whether you are fighting for a buy box, but have you considered putting your prices up to make better margin? I often find putting my prices up only has a small impact on unit sales.
Seller_tc3VxVXAlHXbN
Do you know what the flat rate scheme is? If doing this fulltime eventually staying below the VAT threshold won’t be enough. Even if £80,000 was pure profit…with inflation and in a few years that won’t go far.
I would recommend trying to stay under the flat rate scheme threshold which I believe is £250k the first year you get a discount so its 6.5% vat you pay then goes to 7.5%.
Being vat registered you will get alot more business customers you would be suprised what businesses buy for instance I sell lots of toys to schools.
One regret in hindsight I should not have borrowed so much when so close to any vat threshold because you start doing tonnes of sales then HMRC take a huge chunk and a significant chunk goes on paying people back but you are still doing a tonne of work!
Good Luck I hope you learn from my mistakes.
Yours Sincerely HMRCs slave 
Seller_LdbpJ6pxzzvXO
Flat rate scheme i think is 7.5 up to 250K. your total sales includes VAT on amazon dash board so if your at 80K on that deduct the vat from that total is your 12 month sales the vat doesn’t count for putting you over 80K sales. Check with an accountant but you have a bit of room. its probably around 94ish
I didnt read the whole thread maybe someone mentioned you should be VAT exempt and claim back ay you have paid from amazon except PPC vat
Seller_BgqXV4NKDPBIc
You’re likely already over the VAT threshold if you claimed vat exemption from Amazon and didn’t add the FBA and seller fees to your turnover to calculate whether you were over the threshold.
You need to speak to an accountant asap to get this sorted out.
You may want to consider the VAT Flat Rate Scheme (FRS) which will result in you paying 6.5% of your sales in VAT, but not being able to reclaim VAT on your purchases other than capital purchases above £2,000. One exception to this is when you register for the FRS, you can still reclaim 20% VAT on any stock you currently have at hand. This is a one off thing.
You still wont pay vat on seller fees and FBA fees as these will be reverse charged, so being on the FRS scheme will likely result in a better profit margin when compared to the standard 20% vat scheme.
Definitely speak to an accountant who can advise you on which VAT scheme to select.
Seller_ae51e0CJoHqCX
That’s not really a rule and it really depends on the profit margins.
The spirit of a threshold is to give new starters a headstart and allow tradesmen who perhaps have very little reclaim to make profit rather than being wiped out by VAT like you have with PAYE.
This is why traders from abroad do not benefit from the threshold.
If you are hitting the threshold, it just allows you to continue with an expansion program and personally I think if you want to improve over time then registering is inevitable. Also with thresholds not rising in line with inflation etc, it is probably essential to move on past the threshold and this is what the Government relies on (stealth tax raises).
If you had to increase turnover by 30k to what you was making before you must have had really good margins in which case the obvious choice would be to go flat rate. At around 7.5 percent of your turnover(depending what you are involved in) and assuming you maintained your prices whilst accounting for increased purchases, I really cannot see why you would have to get anywhere near £30k turnover to cover the VAT. I would guess about half of that. If the margins you had were tight then not using the flat rate scheme would mean plenty of reclaims and the liability would be less.
Seller_wysYWpJTa9ClB
Just wanted to say thank you to everyone who’s commented on this thread. It’s been really helpful to read the different viewpoints and experiences and clarify my own thoughts about VAT. I appreciate all the comments.
I’m going ahead with VAT registration, and, although it turns out I had no choice in the end, I’m happy the decision was made for me. It didn’t feel quite right trying to stay below the threshold and sabotaging my own growth…but with everything else going on I was worried about not having the time needed to keep working and growing. This way though, I’ll just have to get on with it!
I keep reminding myself: I didn’t come this far to only come this far.
Thanks again everyone.
