Non-EU Overseas Online Retailers can setup a new Amazon account under a completely separate company name. Once a new account has been setup, the seller can attach the account to all their old products listed on Amazon.
Every seller account is given a unique identifier number that is used to identify the seller on the Amazon website and view their storefront, company details and trading history. Every product listed on Amazon is given a unique code called an “ASIN” short for “Amazon Standard Identification Number”. These ASIN’s are used to identity products on the Amazon website. When a product is added to Amazon the ASIN and product become a permanent part of Amazon’s website catalogue, along with all its sales history, reviews and ranking.
When a seller is removed from Amazon, only the seller account is removed. All their products are left on Amazon and can be found by searching for the ASIN. This is completely contrary to what HMRC has led the Public Accounts Committee to believe.
All a seller needs to do, is find their original ASINs and link them to their new account. Amazon provides seller tools to do this. A seller simply searches the ASIN in their Amazon back office and starts selling it again.
Behaviour of Phoenix Account Sellers
A seller will setup a Phoenix account if they have received a notice from Amazon that their account will be closed.
Many sellers will setup a Phoenix account before they get any notices. Normally this is done when the seller realise they owe so much in unpaid VAT that it would be much easier to setup a Phoenix account than wait till HMRC catch up with them and demand they pay up.
In both instants they can kill off their old account without paying undeclared VAT and get up and running with a new account with a couple of clicks of the mouse.
When a seller setups a Phoenix Account this is what they need:
- New VAT Registered Company
- New Email Address
- New Bank Account
- List of all their old ASINs
- A new laptop & IP address to avoid any possibility of Amazon detecting duplicate accounts.
- The old stock that HMRC didn’t seize and was sent back to them in the UK.
Advice from UK Certified Chartered Accountant:
TB Accountants is a UK VAT Agent & member of Association of Chartered Certified Accountants who specialise in VAT Registration of Chinese Overseas Online Retailers.
This article is published on TB Accountants Chinese website:
The second case: the amount of tax payment can not afford, can only give up the account
- Calculate your own inventory: How many of them are on the road, and cut off as much as possible;
- Calculate how much money is not raised, withdraw funds as soon as possible, so as to avoid the funds being frozen;
- Price cuts, fast clearance, to prevent stocks from being sealed;
- Register a new account, and the new account should be registered with VAT immediately;
- The new account first use the self-delivery method and sell the old account, because this time VAT has not come down, if the new account is issued FBA at this time, then the new account will also have VAT tax problems;
- After the VAT of the new account is down, use FBA to sell the previous listing;
- When the old account history problem is solved, I will take the initiative to stop operating the old account!.
If the amount of tax is large, the seller may choose to give up.
How Sellers protect their product listings on Amazon
Amazon sellers protect their product listing by registering trademarks for the brand names they use on Amazon. If another seller tries to sell a similar product on their listing they can issue a take down notice to Amazon, who in turn will remove the offending sellers. Most third party listings on Amazon will be protected by Trademarks.
Amazon provide a Brand Registry System & Infringement Reporting Tools to sellers.
Example Trademarks
Dragonmarts Company Limited has registered 2 trademarks in the EU:
- Sourcing map: https://trademarks.ipo.gov.uk/ipo-tmcase/page/Results/4/EU014987929
- Uxcell: https://trademarks.ipo.gov.uk/ipo-tmcase/page/Results/4/EU014988075
Holder’s name: Dragonmarts Company Limited. Flat/Rm 1111, N.T., Hong Kong
This means the Sourcing map & Uxcell product listings on Amazon are protected from other sellers “hijacking” and selling on their listings.
Example Product Listings on Amazon
Product Name: Uxcell Nylon Auto Car Dome Fir Tree Mount Cable Tie, 183mmx5mm, 30 Pcs, Black
ASIN: B00UYSLGR4
Product URL: https://www.amazon.co.uk/dp/B00UYSLGR4/
Retailers Selling this product: https://www.amazon.co.uk/gp/offer-listing/B00UYSLGR4
Date First Available: 18 July 2014
This product was purchased by the PAC in September 2017 as part of their investigation into Online VAT Fraud. At the time it was sold by a company called Sourcingmap who where unable to provide a VAT Receipt. Sourcingmap account has since closed.
The product is now being offered by a new Seller called Ascot City.
Example Phoenix Accounts
We can now examine each account that have been selling the Uxcell product on Amazon:
Seller Account 1) Ascot City
Storefront: https://www.amazon.co.uk/s?merchant=AIF4G7PLKBOZY
Business Detail Page: https://www.amazon.co.uk/sp?seller=AIF4G7PLKBOZY
Business Name: Ad Fontes Company Limited
VAT Number: GB 286950455
Business Address: Room 1111, 11/F., Metroplaza, Tower2 223 Hing Fong Road Kwai Fong N.T. 00000 HK
From the information on these pages we can see that they have received 10,000+ reviews in the last 12 months and 15,000+ lifetime reviews. This indicates the seller has been trading on Amazon for around 18 months. But is selling products that have been available on Amazon since 2014
We can also see that this seller is selling over 300,000 Sourcingmap branded products.
Seller Account 2) Sourcingmap
Storefront: https://www.amazon.co.uk/s?merchant=A50DZI580G3JX
Business Detail Page: https://www.amazon.co.uk/sp?seller=A50DZI580G3JX
Business Name: Dragonmarts Company Limited
VAT Number: GB 275266285
Business Address: Room 1111, 11/F, Metroplaza, Tower 2, 223 Hing Fong Road Kwai Fong N.T. 0000 HK
From the information on these pages we can see that they have received very few reviews in the last 12 months, have 194,616+ lifetime reviews and are no longer trading. 194,616 lifetime reviews indicates the seller has done huge volumes of business with their Amazon account.
The VAT number indicates they only recently registered for VAT so will have lots are undeclared VAT to pay.
Both sellers have exactly the same address.
Conclusion
Its very clear that Ad Fontes Company Limited is a Phoenix company of Dragonmarts Company Limited. But it leaves many unanswered questions for HMRC:
- Did HMRC recover any undeclared VAT from Dragonmarts Company Ltd?
- Why does HMRC keep telling the PAC that product listings are removed from Amazon when they clearly aren’t. Can HMRC provide a list of ASIN’S that have been removed from Amazon?
- How much VAT needs to be evaded before HMRC seizes stock?
- What action is HMRC taking with Phoenix companies on Amazon?
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