Food and drink sellers on Amazon say they are facing bankruptcy due to the e-commerce giant’s decision to freeze their funds until they can prove their VAT status.

And despite sending Amazon documentation proving they are UK-based, several report being trapped in a “Kafkaesque” nightmare, receiving automated requests for further proof while the option to remove their stock from Amazon warehouses has been removed.

Amazon told The Grocer that it had “already verified the majority of sellers” and was “taking this situation extremely seriously, committing additional resources to improve and speed up the process”.

But, for seller Guy Wilmot and many others, “still this nightmare isn’t over”. Wilmot’s business, which sells more than £1m of products including Brown Bear, Bird & Wild and Decadent Decaf Coffee on Amazon each year, had around £25,000 frozen in its Amazon account since last month. That money has since been released, but much of the business’ account functionality is yet to be turned back on, and stock is being held in Amazon CFCs with no means to remove it.

Wilmot said he was receiving “almost daily automated emails asking for the same documents”.

“We’re stuck in a loop and starting to doubt if any of this is human-run – it feels more like an Amazon AI bot that’s gotten out of hand,” he told The Grocer. “Amazon is judge, jury and executioner – and it seems there’s no oversight.”

Another business owner, selling petfood on Amazon’s marketplace, told The Grocer he was still unable to withdraw from the business’ Amazon account and was “effectively facing bankruptcy”.

“The process of destroying hundreds of companies is just beginning,” he said.

A specialist ingredient brand also told The Grocer it was still awaiting payments, “which has now built up to a substantial amount required urgently for business continuation”, despite having sent the requested documentation “on multiple occasions”.

“It is a completely unacceptable situation given the size of Amazon and the resources at their disposal to verify sellers in a timely manner,” the brand’s owner said.

The brand’s owner also said Amazon’s support teams had disabled telephone contact options and regularly abandoned chat messaging conversations.

“The seller support is meaningless,” they added. “Amazon just have too much power.”

Under legislation introduced at the start of 2021, online marketplaces are required to collect and remit VAT on transactions involving overseas sellers. Because of the ease with which overseas sellers can set up a UK company and obtain a UK VAT registration number, Amazon and HMRC said they are moving to tackle this fraud by increasing due diligence on sellers on the marketplace.

“To comply with VAT legislation and help combat tax fraud, we recently began a process to perform additional verification of the VAT status of all sellers, in the UK and abroad, that sell on our UK store,” an Amazon spokesman said. “While we tried to make this process as smooth as possible, it did not meet the high standards that we hold ourselves to and we apologise to sellers who experienced issues with verification.

“We encourage government to continue to improve the public information available to determine if a seller is UK-based for VAT purposes,” he added.

Amazon’s approach to getting sellers to prove their status has been met with ire from small business minister Kevin Hollinrake and small business commissioner Liz Barclay, who met with Amazon on Friday after hearing from hundreds of sellers to “share our concerns about the impact of this policy”.

“Sadly no one has a remit over Amazon in these circumstances,” Barclay told The Grocer. “For some the checks are taking so long as to disrupt their business to the point of near bankruptcy. If those firms don’t get access to their funds as a matter of urgency we will see firms going bust with all the consequences we know that can bring.

“This isn’t just about businesses, it’s about lives,” she added, calling on Amazon to treat “people as human beings and not just numbers or cogs in a wheel. Please pay fair and square.”

As the petfood business owner put it: “Amazon always behaves like a bull in a china shop. If Amazon needs to catch a fly in the house, it will burn down the whole house.”

In a Facebook group – ‘Amazon UK Disbursement Deactivated Disaster’ – set up in the wake of the debacle, the anger against Amazon from long-term sellers is palpable.

The situation was “reminiscent of the Post Office scandal,” one commented. “The computer says NO, and it’s a taste of the future for everyone if we allow creeping technology and AI to take over. Sellers are treated with contempt and struggle to get any communication with Amazon at a human level.”

Many have stated they are now focused on growing alternative sales channels after losing faith in Amazon. But that’s easier said than done.

“We don’t have a choice. We’ll collapse without Amazon,” Wilmot said. “A lot of sellers still have their account payments frozen and are very stressed with sleepless nights and drinking heavily to cope. It feels so unjust.”