This article aims to provide UK businesses with a clear understanding of tax mapping considerations when setting up an A2X account, particularly for VAT-related transactions. The examples included in this article offer suggested accounts and tax mapping specifically tailored to UK registered businesses using accounting software such as Xero or QuickBooks to file their MTD VAT return.
It's important to note that VAT and tax mapping can be complex, especially if you're unfamiliar with the various tax transactions from your ecommerce store and how to account for them. Different channels may present different types of tax transactions, ranging from Marketplace Facilitator Tax transactions to UK VAT transactions.
This article is intended solely for the purposes of technical configuration of A2X, there is no guarantee or assurance provided that the detail in this tutorial is best suited to your specific business needs or that it directly suits your tax obligations.
A2X and UK VAT transactions
Below, we provide examples of payouts from an ecommerce channel, along with suggested accounts and tax mapping for UK VAT registered users. Please note that these examples focus on tax mapping and do not include shipping income or other ecommerce expenses. However, the mapping principles discussed here are applicable in those scenarios as well.
Scenario 1: Product sales shipped to GB, UK VAT collected
Info: In this scenario, it is essential to wrap the tax transactions back into the applicable income accounts. This ensures that the accounting system recognizes the full gross sales amounts and accurately accounts for the VAT using the appropriate tax rates.
Scenario 2: Zero rated product sales shipped to GB
Info: For UK sales involving zero-rated products, no VAT transactions are detected. Therefore, the tax mapping should reflect this by excluding VAT from these transactions.
Scenario 3: Product sales shipped to DE, with Marketplace Facilitator Tax
Info: In this scenario, sales have been tagged with MFV (Marketplace Facilitator VAT) because Amazon has collected and remitted some EU VAT on your behalf. These sales are intended for the EU market. To account for these transactions, a zero-rated VAT rate should be applied to the sales, along with a liability account. For the marketplace tax transaction lines, mapping them as "No VAT" will exclude them from your UK VAT return.
Based on the example account and tax mapping provided, below are reference examples of an Amazon invoice in Xero, including VAT, and a VAT return in Xero:
Example Amazon Invoice in Xero including VAT
Example VAT return in Xero
These examples serve as a visual representation of how the tax mapping principles discussed can be applied in practice within accounting software like Xero. By mapping taxes accurately and incorporating them into the appropriate income accounts, businesses can maintain accurate financial records and ensure compliance with UK VAT regulations.
This article is intended solely for technical configuration of A2X, there is no guarantee or assurance provided that the detail in this tutorial is best suited to your specific business needs or that it directly suits your tax obligations.
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