Amazon sellers going limited: stock and the VAT number

Moving an Amazon business into a company is mostly paperwork. Two pieces of it, the stock value and the VAT registration, can cost you tax if done wrong.

If you sell on Amazon as a sole trader and plan to move the business into a limited company in the new year, two decisions matter more than the rest of the paperwork: the value you put on the stock you hand over, and what happens to your VAT number. Get them right and neither costs you any tax. Get them wrong and you can pay tax on profit you never made. The brand and goodwill are a separate Capital Gains Tax question, worth valuing with your accountant before the move.

There is one new step as well. Since 18 November 2025, identity verification for Companies House has been a legal requirement for company directors, so build it into the timetable.

Your stock is sold to the company, at a price the law can rewrite

When your sole trade stops, the stock sitting in Amazon's warehouses has to be given a value. Here it is being sold to your company. Because you and your company are connected, the law does not simply accept the price you choose. It values the stock at what independent parties would have paid each other at arm's length.

For a seller with a healthy margin, that can be more than you paid for the goods. The difference is profit in your final sole trader accounts, taxed as income, even though no customer has bought anything.

There is a way out. Under section 178 of the Income Tax (Trading and Other Income) Act 2005, you and the company can jointly elect to use what the stock cost you instead, or the price the company actually paid if that is higher. The election is available where the arm's length value is more than both of those figures. Both of you must sign it.

What that looks like

Illustration, not a real client. Ifeoma sells bike lights through FBA from Croydon, as a sole trader who registered for VAT voluntarily, below the registration threshold. On 1 January 2027 she moves the business into a new company. Her stock cost £18,000. Another trader would pay about £24,000 for it. The company takes the stock and owes her £18,000.

Without the election, the stock is valued at £24,000. Her last sole trader accounts show £6,000 of extra profit, and she pays Income Tax and National Insurance on it.
With the election, the stock is valued at £18,000. No extra profit, no extra tax.

The deadline is generous, which is why it gets forgotten. The election must be made by the first anniversary of the normal Self Assessment filing date for the tax year the trade stopped. Ifeoma's sole trade stops in the 2026 to 2027 tax year, whose return is due by 31 January 2028, so she and her company have until 31 January 2029. Do it at the time.

The VAT side: no VAT on the stock, if the company is ready

Handing a working business to your own company is normally a transfer of a going concern, or TOGC. Under HMRC's VAT Notice 700/9, the rules are compulsory where the conditions are met, and VAT must not be charged on the stock and other assets that move across.

The condition that catches people is registration. Where the seller is registered for VAT, the company must already be registered at the date of transfer, or required to be. If it is only accepted for voluntary registration, that must be in place when the transfer happens; applying afterwards is not enough. Miss it and the transfer takes its normal VAT treatment. For Ifeoma that would mean charging £3,600 of VAT on £18,000 of stock to her own company.

Then the VAT number. The company can apply to keep yours, online or on form VAT68. It is a real choice:

Keep the number and the company takes on the old registration's liabilities, including any VAT you owe or got wrong. Your invoices and the VAT settings in Seller Central carry on with the same number.
Take a new number and you cancel your own registration. Your past VAT stays with you, and the company starts clean, but every place your number appears needs changing.

If your own VAT returns are tidy, keeping the number is usually simpler. If they are not, sort them out before the company inherits them.

Amazon needs to know too

The seller account and the bank account Amazon pays into both need to show the company, not you. Start that early and settle the date with your accountant before you tell Amazon, HMRC and Companies House. A clean cut-off at the end of a settlement period makes the last sole trader accounts much easier to finish.

The company decision itself depends on your profit and what you draw, and that is a conversation for an accountant who knows Amazon seller accounts. Once it is made, the stock election and the VAT registration are the two pieces of paper most likely to cost you tax if they are missed.

About the author

Harvey Dhillon is the founder and CEO of Zmartly, a UK accountancy firm for ecommerce sellers. He grew up in West London and began his career in investment banking finance at Barclays, before going full-time on Zmartly in 2020. He is a Chartered Management Accountant (ACMA, CGMA).

Featured photo by Bench Accounting on Unsplash.