If you’re looking at setting up as an Amazon Seller or setting up an Amazon FBA business , you may have questions stuck in your mind, like: “Do I need a business license to sell on Amazon UK?” If you’re not sure, don’t worry; we’ve got your back. This easy-to-read (non-legal jargon) article will explain UK business set-up requirements in relation to your Amazon business. Keep reading to learn about the following:
ABOUT THE AUTHOR
Mushma Shami BSC (Hons) Applied Accounting
Mushma is a Hustle Life guest writer with an honours degree in Applied Accounting and has been certified by the Association of Chartered Certified Accountants (ACCA).
She enjoys writing about and sharing her thoughts on best practice for digital businesses.
We look forward to more great articles from Mushma.
The UK is the second-biggest European market for Amazon. About 86% of the population uses Amazon to shop online, making it one of the biggest online marketplaces in the UK.
Keeping these incredible stats in mind, it’s no wonder that digital entrepreneurs are lining up to start selling on the platform.
But before you jump into selling on Amazon, there are a few legal and tax considerations that you should think about.
A business license allows you to operate your business in the UK. The kind of business license you need depends on the activities of your business and its location.
If you don’t have the proper license for the kind of business you’re operating, you could face hefty fines or penalties and even prosecution.
There are several types of business licenses. To determine if you need a license, you need to consider the type of business you have and what interaction you will be having with the consumer or the public.
The primary types of business licenses in the UK are as below:
If you provide “licensable activities” such as selling alcohol or serving hot food and drinks within a particular period of time, you will need a premises license. A premises license will also be required if you provide entertainment like live music or sporting events.
If you sell holiday packages, flights, or carry a certain number of passengers every year, you will need ATOL for your business. If you’re working as an agent with an ATOL holder, you may not need an ATOL yourself. Click here for more details.
To sell alcohol from licensed premises, you can apply for a license through your local authority.
There are also several other types of permits for business activities that are unlikely to overlap with Amazon FBA activities, such as:
The business activities that require you to have a business license in the UK don’t match with the majority of products being sold on Amazon. So, our research tells us that in most cases, Amazon Sellers don’t need a special business license to run an Amazon FBA business in the UK. If you want to make further inquiries about your specific business, you can use this license finder as a starting point.
Even if you can you sell on Amazon without a business license, you may still need to comply with other laws and regulations.
For example, there are additional online selling rules designed to help protect the UK consumer and to ensure that online businesses are collecting and paying Value Added Tax (VAT) / sales tax correctly.
These rules include providing the customer with the following:
So even if you don’t need a business license, you have a responsibility to your customer to provide them with a hassle-free experience.
The most common small to medium business structures in the UK are:
Sole Trader – You operate your business as Sole Proprietorship and are self-employed, and you are wholly and solely responsible for your business’s debts. Amazon UK has listed the documents sole proprietors need here.
Limited Company – Your business is separate from you, so you don’t have to sell your personal assets to cover your business liabilities. Amazon UK states the documents you need for registering a Limited Company here.
Partnership – Two or more people can operate a business, they share the profits as well as the responsibility for any kinds of losses.
Now that you have got the answer to your question, “Do you need a business license for amazon FBA?”. Another commonly asked question is, “Do you need a Limited Company to sell on Amazon FBA?”
The direct answer to your question is NO; you don’t need a Limited Company to sell on Amazon FBA. You can operate your Amazon Account as an individual (Sole Trader).
When you set up your Amazon Seller Account, you can opt between various types of business, and one of the options is “None, I am an individual”.
However, you can choose to run your online business as a Limited Company to take advantage of some tax and legal benefits.
Suppose you have a small business (low turnover) that’s not making serious profits. In that case, it’s better to operate your online business as a Sole Trader.
As a sole proprietor, you won’t have to register for or process VAT (Value Added Tax) until your turnover is more than £85,000 during a 12-month period.
Hustle Life Tip: Consider voluntary VAT registration if you buy from other businesses that charge you VAT, so you can claim back the VAT that you paid!
The drawback to being a Sole Trader is that you will be paying tax at the income tax rates on the profits from your business. This means you may pay a higher tax rate than corporation tax rates.
In addition to this, there are very few protections when working as a sole proprietor. You and your business are considered one and the same. Therefore, Sole Traders have little legal protection and unlimited personal liability.
On the other hand, operating your Amazon FBA business as a UK Limited Company will ensure your company doesn’t pay tax higher than the current corporation tax rate, i.e., 19% for 2021/2022, no matter how much you earn.
In addition, as the business owner of a Ltd company, you can pay yourself dividends (profits on shares). The huge benefit is that the dividend tax rates are still lower than personal income tax rates (correct at 2021/2022 tax year). This means you get to keep more profits and give away less money in tax.
Finally, operating a UK Limited Company allows you to keep your business and personal assets separate so that there is ‘Limited Liability’ if anything goes wrong!
Here are the steps that you need to follow to register your business in the UK:
On Amazon FBA, the best choice for you may be to opt between an Individual and a Limited Company.
Although you aren’t required to register a business name as a sole trader, you must do so if you’re operating as a Limited Company.
Your registered business name must be unique, and it can contain either ‘Limited’ or ‘Ltd’ in the end.
It’s essential to select a unique name. To check name availability, you should search for a trademark via trademark number, owner, or image.
When setting up as a Limited Company, some specific organizational tasks need to be done:
Remember that you must register for VAT when your turnover exceeds £85,000 in a year. You will also need to maintain a record of the revenue and expenses of your business every year.
Hustle Life Tip: Get a bookkeeper or accountant involved early on to help organize your accounts and avoid HMRC or tax issues.
The best thing about having an Amazon UK account is that it automatically gives you access to five other European marketplaces (Spain, Germany, Italy, France, and the Netherlands). You can easily manage your orders in these marketplaces with a UK Amazon Seller Central Account.
Only Europe and North America have these types of unified accounts. If you’re selling in Asia (India, Japan, China, and Australia), you need to have separate accounts in each country.
Selling internationally can be lucrative, but it comes with complications. Our recommendation is to start off with local sales before expanding. If you’re all set to expand, consult with the appropriate professional for legal and tax advice.
As a UK Amazon FBA Seller, there are several rules and regulations that you should be aware of.
Many sellers who want help with these rules and want to accelerate their FBA business growth also choose to enroll in a course. If you want to stack the deck in your favor, then read our pick of the Best Amazon FBA Courses to set you on your way.
But, ultimately, setting up your UK Amazon FBA business structure as either a Sole Trader or as a Ltd Company isn’t something to stress about. It may take time and patience to get everything in order, but remember, it isn’t rocket science!
Yes, you need to have your UTR (which is a Tax ID number) if you plan on setting up as a sole proprietor / individual trader on Amazon. You can obtain a UTR when you register for self-assessment with HMRC.
It’s OK to switch account types, but your account may be put on hold for a few days while Amazon verifies your company / legal entity information.
Yes, the Amazon Global Selling program allows you to operate your business internationally no matter where your business is physically established. Therefore, a non-UK resident can open up an Amazon UK business.
Amazon UK does not require you to be a registered business in order to sell on their platform.
Yes, all you need to do is select an Individual Seller account when registering on Amazon.
3 Reasons to consider registering a trademark to:
Disclaimer: Information printed on this site is general and not a one size fits all. The details of your own situation should be carefully considered. Do your own research from reputable sources and where necessary seek advice from a qualified individual about your specific circumstances. We encourage you to make your decisions based on due diligence.
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