Penguin Random House’s decision to reroute European Amazon orders through its Grantham warehouse is pulling a specific group of overseas publishers into UK VAT obligations they may not have faced before. This article explains what that means and how to resolve it before the September deadline.
Key Takeaways
- Publishers whose books are held in a UK warehouse and sold on to customers in the UK are treated by HMRC as making taxable supplies in the UK, triggering a VAT registration requirement.
- Overseas businesses are classed as Non-Established Taxable Persons (NETPs), and the standard UK VAT registration threshold does not apply to them at all: a NETP must register from the very first taxable supply, however small.
- Publishers whose UK sales are entirely books, which are zero-rated for VAT, can apply for an exemption from registration instead of registering in full.
- The exemption is not automatic. HMRC assesses each application and can refuse it, in which case the business is registered anyway.
- Either route, registration or exemption, typically takes several weeks to process once the application is submitted, so publishers affected by the Grantham changes should not leave this until the last moment.
- Rules for non-UK resident publishers differ meaningfully from those for UK-based businesses, particularly around thresholds and registration timing, and this is often where overseas publishers get caught out.
Why the Grantham warehouse change creates a VAT issue
Penguin Random House operates two related businesses. It publishes its own titles and also provides distribution services, warehousing, order fulfillment, and shipping to a wide range of smaller and independent publishers who rely on that infrastructure rather than building their own. As part of a broader shift in how US-originated stock reaches European customers, PRH is moving distribution for continental European Amazon orders through its Grantham warehouse in England rather than shipping directly from the United States.
For the publishers using this service, the change looks purely operational from a supply chain perspective. From HMRC’s point of view, it is not quite that simple, and it is worth being precise about why. Holding stock in a UK warehouse does not, by itself, create a UK VAT presence: HMRC’s own guidance recognizes that goods imported and sold from a UK fulfillment address, where the warehouse exists solely to send and receive goods, will not usually count as a UK establishment. What does create the VAT issue is what happens next. Once orders are being fulfilled and taxable supplies are being made from that UK stock, the publisher is making supplies in the UK for VAT purposes, regardless of where the business itself is based, where its customers are located, or how small its UK-related turnover is. In practice, for a publisher routing books through Grantham to reach paying customers, that distinction changes little: fulfilling orders from the warehouse is exactly what triggers the liability, even though the warehouse sitting there empty would not.
Why the usual VAT threshold does not help here
UK-established businesses only need to register for VAT once their taxable turnover passes a set threshold within a rolling 12-month period, and can generally plan around that. Overseas businesses do not get this benefit. HMRC treats them as Non-Established Taxable Persons, and the registration threshold that applies to UK businesses does not apply to NETPs. A NETP becomes liable to register the moment it makes any taxable supply in the UK, no matter how small, and this has been the position since 2012. A publisher shipping a handful of copies through Grantham is, in HMRC’s eyes, in the same position as one shipping thousands.
This catches out many smaller publishers who assume that limited UK sales volume buys them some breathing room. It does not. The test is not how much you sell in the UK; it is whether you are established there at all.
The two routes available
Publishers affected by the Grantham change generally have two options, and which one applies depends on what they sell through that UK channel.
Full VAT registration is the right route when a publisher’s UK supplies are a mix of zero-rated items (most books) and standard- or reduced-rated items, such as certain merchandise, non-book stationery items, or supplementary digital products sold alongside physical stock. Once registered, the publisher must charge VAT where due, file returns, and meet the ongoing compliance obligations that come with any UK VAT registration.
Exemption from registration is available where a publisher’s UK supplies are all zero-rated, which will be the case for most publishers whose UK-warehoused stock is exclusively printed books. Rather than registering, the publisher applies to HMRC for permission not to register at all. This is a formal application, not an automatic entitlement, and HMRC reviews each one. If the request is granted, the publisher will have no ongoing VAT return obligations associated with that UK activity. If it is refused, HMRC will proceed to register the business in the normal way.
It is worth being precise about the terminology here, because it is confusing. This is an exemption, not an exception. An exception is available to a UK-established business if it temporarily exceeds the standard threshold. NETPs are not eligible for that, because there is no threshold for them to exceed in the first place. For a books-only overseas publisher, the relief most commonly available is the zero-rated supplies exemption. However, specialist fact patterns involving marketplace deeming provisions or supplies outside the scope of UK VAT can sometimes produce a different outcome, which is why each publisher’s position should be checked on its own facts rather than assumed from the general rule.
Why the timing matters
Whichever route applies, the application takes time to process. Publishers who wait until stock is already moving through Grantham before starting the paperwork risk a gap between when their VAT obligation technically begins and when HMRC has actually dealt with their application. PRH has told affected publishers that failure to resolve UK VAT status in good time puts their place in the Grantham-to-Amazon-Europe pipeline at risk. Hence, this is not simply a compliance formality in the background; for publishers relying on this route to reach European Amazon customers, sorting out VAT status is now a condition for keeping that sales channel open.
Given the processing time involved, publishers who have not already reviewed their position should treat this as urgent rather than something to revisit closer to the deadline.
What should non-UK resident publishers check now?
Publishers based outside the UK and affected by the Grantham changes should work through a few questions before deciding which route to take. First, is everything sold through the UK warehouse genuinely zero-rated, or does the product mix include anything standard or reduced-rated that would rule out the exemption route? Second, has the business previously made any other UK taxable supplies that might already have created a registration obligation independent of the Grantham arrangement? Third, does the business have the underlying VAT knowledge in-house to manage an application correctly the first time, given that if HMRC refuses the exemption application, the business will normally be required to register for UK VAT and comply with the usual VAT obligations.
There is also a question specific to this situation that is easy to overlook: whether Amazon, as the marketplace facilitating the sale, changes where the VAT liability sits. Since 2021, the VAT Act treats an online marketplace as the supplier of goods to the end customer where those goods are in the UK at the point of sale, and the seller is based overseas. In practice, this means the publisher’s supply is treated as a zero-rated sale to Amazon rather than a supply to the end reader, and Amazon takes on responsibility for charging and accounting for VAT to the customer. This deemed supplier treatment is often the reason the exemption from registration is available to the publisher in the first place, since it converts what would otherwise be a standard-rated retail supply into a zero-rated one for VAT registration purposes. Publishers should not assume that selling through Amazon automatically secures this outcome, since it depends on Amazon having confirmed the publisher’s overseas seller status and on all relevant sales genuinely running through the marketplace to non-business customers, rather than through PRH or Amazon to VAT-registered business buyers, which would fall outside the deemed supplier rule and could require the publisher to account for VAT itself.
Because NETP status carries different rules from those most UK accountants and publishers are used to dealing with, this is an area where getting professional advice early tends to save far more time than it costs.
Conclusion
The Grantham warehouse change is a supply chain decision by Penguin Random House, but its tax consequences fall squarely on the publishers using the service. Because the NETP rules remove any turnover-based breathing room, even the smallest overseas publisher moving stock through a UK warehouse needs to determine whether it should register for VAT or apply for exemption, and do so with enough lead time for HMRC to process the application before the September deadline PRH has set. Publishers who treat this as routine paperwork rather than a genuine deadline risk losing access to a sales channel they may have relied on for years.
FAQ
Yes. There is no minimum turnover for NETPs. A single taxable supply made in the UK is enough to create a registration obligation.
Yes. Registration is always available, and some publishers choose to register anyway to recover UK import VAT, even where they would otherwise qualify for exemption.
HMRC will register the business for VAT in the normal way, and the publisher will need to meet the usual return and compliance obligations from that point.
No. If a publisher later starts making any UK supply that is not zero-rated, it generally needs to notify HMRC within a set period, and the exemption may no longer apply.
Yes, significantly. UK-established businesses benefit from a turnover threshold below which registration is not required. Overseas publishers classed as NETPs do not get this threshold at all, which is the core reason this catches so many smaller international publishers off guard.
How Sterling & Wells can help
Sterling & Wells advises overseas publishers and other non-UK-resident businesses on UK VAT registration, NETP status, and exemption applications. If your business is affected by changes to how stock reaches UK or European customers, our team can review your position and manage the application process on your behalf.
