Amazon could face legal action from hundreds of sellers due to frozen funds linked to VAT status verification issues.
Rosenblatt, a law firm, is preparing a case for affected sellers, with the frozen amounts reportedly reaching tens of millions.
Many sellers are experiencing severe financial distress, with some on the brink of bankruptcy.
Amazon’s freeze followed increased due diligence measures required by UK VAT legislation, prompting complaints from sellers about repeated documentation requests.
Amazon claims to be expediting the process while acknowledging HMRC’s changing verification standards.
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Impact of Amazon’s VAT Verification Policy
The situation began escalating in early 2023 when Amazon implemented stricter protocols to ensure compliance with UK VAT legislation aimed at preventing fraud from overseas sellers.
Although necessary to meet legal obligations, many sellers experienced prolonged delays in accessing their funds, sometimes leading to potential bankruptcy or severe mental health issues.
Small business commissioner Liz Barclay expressed concern, highlighting the emotional toll on sellers involved.
Legal Action in Progress
Rosenblatt is leading the legal charge to seek compensation for affected sellers, whose funds remain inaccessible.
The law firm claims that Amazon’s actions are “unlawful” and has been working to help sellers recover millions of pounds that have been “wrongfully withheld.”
While Amazon has taken steps to resolve the issue by allocating additional resources, frustration among sellers remains high.
Industry Response
As the legal process unfolds, Amazon faces increasing pressure to improve its VAT verification processes and unfreeze seller funds.
Business groups and sellers alike are calling for a more efficient approach to ensure compliance without compromising the livelihoods of small businesses.
Outlook for Sellers and Amazon
While Amazon has stated that the majority of affected sellers have been verified, the ongoing situation poses risks to its reputation and seller trust.
As the lawsuit moves forward, the potential legal consequences could serve as a precedent for how e-commerce giants handle regulatory compliance without unduly affecting their business partners.
