Government minister Kevin Hollinrake has demanded Amazon unfreezes the funds it is holding back from hundreds of sellers under new VAT checks that have left some small businesses facing possible bankruptcy.
The enterprise minister said he was “very concerned” after up to 400 traders appealed to small business commissioner Liz Barclay for help following the retail giant withholding their money for months.
Amazon has paused payments to some sellers while it carries out stricter checks to ensure they are based in the UK for tax purposes.
The retailer now requires additional documents from sellers to prove they operate in the country.
As a result, many businesses have been left sitting in limbo for months, and are unable to cover taxes and other costs, with some concerned they could collapse.
Hollinrake said: “We are writing to Amazon to tell them to unfreeze the accounts until they have a proper process in place.
“We understand why they are doing it – we need to ensure VAT is collected – but doing it on a knee-jerk basis, especially at a time when there is self-assessment due, is pretty ill-timed.”
Writing in a letter to Amazon’s UK chief executive, John Boumphrey, Hollinrake said: “I would urge you to look into this issue further as a matter of urgency and ensure you are supporting those whose accounts have been impacted by this.
“We’ve been inundated with email appeals for help from desperate sellers in danger of losing their businesses.
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“A 70-year-old couple this morning, in business for 40 years, is unable to pay VAT, tax and bills, and others can’t afford to feed their families, because their accounts are frozen. People are waiting for…up to £300,000.
“The mental health problems emanating from this are dire. Small firms need to be paid quickly to carry on operating. This must be resolved immediately before a tragedy occurs.”
Hundreds of sellers on the online platform have written complaints since the beginning of January, according to The Telegraph.
Retailers have expressed their concerns to officials from the Business Department and HMRC, the publication understands.
Amazon claimed it was obligated to collect VAT on transactions that involved overseas sellers under laws implemented in January 2021.
A spokesman for the company said: “Under UK tax legislation, online stores are required to collect and remit VAT on transactions involving overseas sellers. We therefore require verification of all sellers, which may include additional requests for information about where they are based.
“We aim to minimise any inconvenience this may cause sellers and they can contact our support teams for further advice.”
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