VAT on Delivery Charges

[raredvd]

Hello,

I've got a question, as usual with tax its seems impossible to find a clear answer anywhere.

I'm selling products online, do I charge VAT on the delivery cost?

So if I sell a product that costs £14.99 including VAT, then I charge £2.99 for postage, do I include VAT on the postage too?

The difference would be £14.99 + £2.99 = VAT of 3.14

Or £14.99 = VAT of 2.62

Any help much appreciated.

[Courir]

Here you go - the official line from HM Customs here (http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortalWebApp.portal?_nfpb=true&_pageLabel=pageVAT_ShowContent&id=HMCE_CL_000114&propertyType=document).

Thought it best to post the link with full details behind it as you do not want to get something like this wrong! The link has a lot of useful information too.

Best of luck, Mike

[raredvd]

Thanks for the quick reply...

I seem to understand from the HMRC document that I should be charging VAT on delivery charges I make to customers, but I've looked at my competitors (well established companies turning over several million) and they only charge VAT on the cost of the product, not the delivery charge!

[Top Hat]

Yes you need to charge vat on delivery.

I think (and you need to check) that if the item is VAT free you don't need to charge vat on the delivery.

So DVDs you need to charge VAT.

Are the competitors shipping from outside the EU or the channel islands?

[raredvd]

The items are consumer electronics.

My competitors aren't shipping from outside of the EU or the channel islands, all from mainland UK.

Is it be cause they are using a Retail VAT scheme or something?

[SL65]

You will always be charged for VAT for items sent within the UK and to European destinations. You should accordingly forward these VAT costs on to your customers.

[jholden]

I would suggest you revisit your vat. Have a look at the links below, the first is about retail schemes and the second is designed to help you decide which VAT Accounting scheme is best for you.

Retail schemes:
http://www.hmrc.gov.uk/vat/account-retail.htm

Which VAT Scheme is best for you:
http://www.hmrc.gov.uk/vat/vat-account-choose.htm

Where is your accountant in all this? You really shouldn't have to work all this out yourself they should be supporting you. Make them earn their keep :)

Good luck.

Jason

[deniser]

Try this:
http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortalWebApp.portal?_nfpb=true&_pageLabel=pageVAT_ShowContent&id=HMCE_CL_000114&propertyType=document

[raredvd]

Well the HMRC say that they should be charged VAT for postage charges, but my competitors don't. The problem remains!

My competitor A's checkout looks like this

item -----14.99
p&P ------3.95

VAT ------ 2.62

[rajajang]

i think giving him another link and reading long long articles on VAT i think somebody should be giving straight and simple answer will help all.

[elainec100@cheapaccounting]

Well the HMRC say that they should be charged VAT for postage charges, but my competitors don't. The problem remains!

My competitor A's checkout looks like this

item -----14.99
p&P ------3.95

VAT ------ 2.62

Well that is their problem really - you must account for it as detailed otherwise it will be a problem for you later.

[raredvd]

Ok fair enough....so could anyone tell me a yes or no answer to the following questions:

Do HMRC regulations say that I have to charge VAT on my £2.99 delivery charge?

Do I have to pay 17.5% to HMRC every time I charge a customer for delivery?

[Top Hat]

Ok fair enough....so could anyone tell me a yes or no answer to the following questions:

Do HMRC regulations say that I have to charge VAT on my £2.99 delivery charge?

Do I have to pay 17.5% to HMRC every time I charge a customer for delivery?

Yes you have to charge vat on delivery.

Don't think of VAT as your money, it's not, it's tax you're collecting from the consumer for the government.

As for your competitor example was the vat £2.82 if so they are charging the correct amount, I cant see how they came to £2.62, cause that's not the vat for just the product.

Finally if your competitors have got the vat wrong dob them in

[elainec100@cheapaccounting]

The VAT liability for delivery is based on the liability of the goods being delivered.

So if they have VAT on them - yes you charge vat on delivery (assuming you are not on a special scheme)

So the answers are yes and yes.

[raredvd]

I made a mistake in the previous example, my competitors checkout looks like this :

Item -----£20.00
P&P ----- £3.95

VAT----- £3.5

Total ---- £27.45

Surely based on your answers, this is wrong? I find it hard to believe though as they are a well established company and have a large turnover.

I'll start charging VAT on delivery then! Bit annoying that my competitors don't though.

[deniser]

Sorry rajajang!

The guidance note seems quite clear. I have since also called the VAT helpline to verify my understanding of the position.

Regardless of the method you send out the goods, if there is one contract such as you would have by mail order, then you charge the same rate of VAT on the delivery charge as you do on the goods.

So in my case where the goods are children's clothes which are zero rated, there is no VAT on delivery charges whether I use Royal Mail (no VAT charged to me) or courier (VAT charged to me at 17.5% but which I can recover).

If your goods are subject to 17.5% VAT then you must charge this on the delivery element as well. But if there is free postage then there is no extra VAT to pay.

So basically you charge VAT on the total amount expended by the customer unless zero rated.

[Freight Search]

Haulage or Delivery is VAT applicatble and all carriers accept the Royal Mail in the UK will apply VAT to your deliveries. You should forward these costs to your customers. There are obviously 2 ways to display the amounts.......total amount inc. VAT or amount +VAT. You will have to do some experimenting to determine which is more attractive to your customers.

[raredvd]

So the Royal Mail won't apply VAT to deliveries?

I think its time to call HMRC.

[raredvd]

If anyone is interested to see what Im talking about, I've found another online retailer that doesn't charge VAT on Royal Mail delivery.

See www.easyishop.co.uk

if you add something to checkout and then proceed by pressing checkout, you'll see what I mean.

[elainec100@cheapaccounting]

I quote from HMRC web site on delivery charges:

Postal services provided by the Post Office are exempt from VAT, but this exemption does not extend to similar services provided by other suppliers, even where this might be seen as being in direct competition with the Post Office. However, if any delivery charge you make to your own customers includes the cost of stamps you buy from the Post Office you may have to charge VAT on the whole amount including the cost of those stamps.

Here is the link:

http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortalWebApp.portal?_nfpb=true&_pageLabel=pageVAT_ShowContent&id=HMCE_CL_000114&propertyType=document#P34_2182

I think you will find HMRC confirm the above. Please do ring them and then we can out this one to bed!

[raredvd]

Yes it seems to be the case! I rang them and they confirmed this... I'm still confused as to why other retailers (who are well established and obviously understand how to do their accounts) don't charge VAT on delivery.

Frustrating...

[Top Hat]

Tell the VAT office

[raredvd]

How do I do that?

[Top Hat]

I guess you phone them up and say that your confused by how X are doing the vat on delivery.

When I had a VAT inspection the first thing I was asked was 'Do I charge VAT on delivery' so I guess they are pretty hot on it.

[davebrown]

VATable goods = VAT on delivery. Not rocket science. If a competitor is not charging it, they're getting it wrong.

[yorkshirejames]

http://www.direct.gov.uk/en/MoneyTaxAndBenefits/Taxes/ContactOrDealWithHMRC/DG_10010579 - reporting VAT fraud - call 0800 595000.

[3pic]

Its not exactly VAT fraud (deliberate intent, mens rea and all that). More a case of a supplier not bothering to check the liability of their supply. Happens a lot, that's why this forum is full of VAT questions on e-services, international transactions, place of supply, etc.

The suppliers, when visited by HMRC, will have to pay over the VAT they have not charged going back three years so these suppliers will eventually be caught out and they will have to stump up the cash, plus interest/penalties for not paying the VAT over at the correct time.

Still worth mentioning it to the local VAT office of course to level the playing field!:)

[SouthernBusiness]

What about a supplier delivering goods that include VAT and some goods that are VAT free? Should they also charge VAT?
So far they total the goods then list delivery and VAT [calculated from goods excluding delivery]. Then total

[3pic]

Assuming the delivery consists of two different items (one zero, one standard rated) then the delivery charge should be apportioned between standard and zero rated VAT, depending upon the ratio of standard and zero rated items being delivered.

In reality, this splitting does not always take place and VAT is applied to everything. Of course, HMRC have no issue if you want to charge VAT on something that doesn't require it. They will have an issue if you try to zero rate the whole delivery becuase there is a small book in the overall package!.

[imayne]

Hi. I wanted to reply to this post as its the same with me.

I totally understand that I need to 0-rate any goods despatched within the EU once the buyer provides a valid VAT number. But what about shipping charges? Should I charge VAT on shipping...to France?


Ex: 2 eggs (£10 + 0-rated VAT)
DHL shipping (£25 + VAT at 20%)
Total: £10 + £30


Regards

[3pic]

Same rules apply, the courier/postage charge follows that of what is being posted, so you'd zero rate your entire charge to the French customer and reclaim the input tax from the courier (assuming you're not on flat rate scheme where you cannot reclaim your input tax).

[imayne]

Thanks for your reply.

Ive contacted HMRC, this morning, and was told the same thing; to zero-rate the total (under conditions which I met).

Another question...what about Australian businesses? Same zero-rate on goods/shipping? If this is confusing, I will have to give HMRC another ring ;)