Re: 3% VAT
Under EU VAT law, for "Business to Consumer" transactions, and where the deliverable is "not physical" (eg. services, software, or electronic books), the VAT is charged where the vendor is based. In the case of Amazon (and iTunes, and the rest) that's Luxembourg. The VAT on electronic books (and anything else a consumer in the UK downloads from Amazon, iTunes and the rest) goes to Luxembourg, not to the UK.
For "Business to Business" transactions, and where the deliverable is "not physical", the VAT is charged where the purchaser is based. So, as a business purchaser, if you can demonstrate to the vendor of "non physical" items that you are indeed a business and are VAT registered, they should not charge Luxembourg VAT (and you will instead have to account for the VAT on your UK VAT return). However, try telling that to iTunes, Amazon and the rest...
For all transactions where the deliverable is "physical" (eg. a piece of hardware you bought from Amazon), the VAT is charged where the purchaser is based. Which means that, if a consumer buys a physical DVD of a piece of software from Amazon, they pay UK VAT, and if they buy a download of the same piece of software, from the same vendor, they pay Luxembourg VAT.
Oh, and BTW, if you've paid Luxembourg VAT, you can't claim it back on your UK VAT return.
Great, aint it?