Amazon Sellers on the Brink of Bankruptcy Due to VAT Verification Crisis

Small businesses selling food and beverages on Amazon are facing a dire situation as the e-commerce giant holds their funds until they prove their VAT status. Despite providing evidence of being UK-based, sellers are stuck in a bureaucratic nightmare, facing endless automated requests for more proof and unable to withdraw their stock from Amazon's warehouses.


While Amazon claims to have verified most sellers and is working to speed up the process, many, like Guy Wilmot, continue to struggle. Wilmot, whose business brings in over £1 million annually through Amazon sales, had £25,000 locked in his account for weeks. Although the money has been released, much of the account’s functionality remains disabled, with inventory stuck in Amazon’s warehouses.


Wilmot described the experience as being trapped in a loop of automated emails demanding the same documentation repeatedly. Another seller, who sells pet food, is still unable to access funds from their Amazon account, putting their business at risk of bankruptcy.


A specialized ingredient brand also expressed frustration, stating that despite submitting required documentation multiple times, they were still awaiting critical payments.


Amazon's verification process, mandated by legislation introduced in 2021 to combat tax fraud, has drawn criticism from government officials and small business advocates. Small Business Commissioner Liz Barclay warned of the severe consequences if funds aren't released urgently, stressing the impact on businesses and lives.


In response to the crisis, some sellers are considering alternative sales channels. However, the transition away from Amazon is challenging for many, as the platform remains a lifeline for their businesses.


In online forums, sellers expressed frustration and disillusionment with Amazon's handling of the situation, likening it to the Post Office scandal. Many are now focused on diversifying their sales channels, recognizing the risks of relying too heavily on a single platform.

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Amit Bhaskar

CEO

Team | AMZ Pro

Amit is the co-founder of AMZPro. He has been helping businesses succeed on Amazon since 2014. He also holds a lot of certifications from Amazon like ATES (Amazon Trained Ecommerce Specialist) & Amazon Ads Expert. He has worked with 100s of small & medium businesses around the world so as to make their Amazon dream come true. He is also a big believer of e-commerce & believes that soon the world will shift to mostly ecomm from mostly retail (brick & mortar stores) as of now. He also loves hiking & off-roading.

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