UK VAT
The Xero tax rate each part of an Amazon settlement should use, for UK VAT-registered sellers.
Last updated: 19 September 2026
Short answer: for a UK VAT-registered Amazon seller in Xero, UK sales and refunds use 20% (VAT on Income), exports and Marketplace Facilitator orders use Zero Rated Income, Amazon fees from 1 August 2024 use 20% (VAT on Expenses), fees before that date use Reverse Charge Expenses (20%), and reserves, reimbursements and transfers use No VAT. Amazon's amounts already include VAT, so post them tax-inclusive.
The first column is the part of the settlement; the second is the rate's name in Xero; the third is the code Xero uses behind the scenes (you'll see it in error messages and integration settings).
| Settlement item | Xero tax rate | Xero code |
|---|---|---|
| Sales to UK customers (product price, shipping, gift wrap) | 20% (VAT on Income) | OUTPUT2 |
| Promotional discounts on UK sales | 20% (VAT on Income) | OUTPUT2 |
| Refunds of UK sales | 20% (VAT on Income) | OUTPUT2 |
| Sales shipped outside the UK (exports) | Zero Rated Income | ZERORATEDOUTPUT |
| Orders where Amazon collected the VAT (Marketplace Facilitator) | Zero Rated Income | ZERORATEDOUTPUT |
| Seller fees, FBA fees and storage — from 1 August 2024 | 20% (VAT on Expenses) | INPUT2 |
| Seller fees, FBA fees and storage — before 1 August 2024 | Reverse Charge Expenses (20%) | REVERSECHARGES |
| Sponsored Products and other Amazon advertising | 20% (VAT on Expenses) | INPUT2 |
| Digital Services Fee | 20% (VAT on Expenses) | INPUT2 |
| Inventory reimbursements (lost or damaged stock) | No VAT | NONE |
| Reserve held and released | No VAT | NONE |
| Transfers, micro-deposits, card charges to clear a negative balance | No VAT | NONE |
This is the standard treatment for a UK-established, VAT-registered seller. Special cases (Northern Ireland, partial exemption, flat-rate scheme, overseas establishments) need your accountant's view. General information, not tax advice.
When you sell to a UK customer you're the supplier and you owe the VAT. Amazon shows the price and the VAT on separate rows (Principal and Tax). Post their combined amount as a VAT-inclusive line at 20%, and Xero will split out the VAT for Box 1.
Goods sent to customers outside the UK are exports and zero-rated. On some cross-border orders Amazon itself is treated as the seller for VAT purposes and collects the VAT at the destination; your sale to Amazon is still zero-rated in the UK. Both still count as turnover, so use Zero Rated Income, not No VAT. See Marketplace Facilitator VAT and zero-rated vs standard-rated sales.
Until 31 July 2024 most UK seller fees were billed from Luxembourg, so VAT-registered sellers accounted for them under the reverse charge. From 1 August 2024 they are billed by Amazon's UK branch with 20% VAT added, which you can normally reclaim. A settlement that runs across that date needs both rates. Advertising was already billed with UK VAT before the change. Full detail: the August 2024 change.
These aren't sales or purchases. A reserve is your own money held back; a reimbursement is compensation for stock Amazon lost or damaged. They stay off the VAT return entirely.
TrueBooks applies these rates line by line from the settlement report — including splitting a settlement across the August 2024 date and detecting exports from each order's ship-to country — and posts tax-inclusive invoices with Xero's correct UK codes. Its VAT audit view then shows the result by return box. See how it works.
They're separate rates. Sales must use the income version (API code ZERORATEDOUTPUT) so the value lands in Box 6 of your VAT return. Using the expense version on a sales line, or a code that doesn't exist in UK Xero, either misreports the sale or makes Xero reject the invoice.
No. Zero-rated sales are taxable supplies at 0% and are reported in Box 6. 'No VAT' (outside the scope) is for items that aren't supplies at all, such as Amazon's reserve movements or transfers, and is left off the VAT return. Using No VAT on export sales understates your Box 6 turnover.
Use No VAT on everything. Without a VAT registration you don't charge output VAT or reclaim input VAT, so Amazon's VAT-inclusive fees are simply a full cost to you.
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