VAT on carriage......

[Justin Smith]

I`ve specifically put this thread in the E Commerce forum because I think more people with an interest in its answer would be reading this forum, and not the tax forum......

Does anyone confirm that I`m correct in this (because I`ve received conflicting advice on it) ?

VAT is chargeable on the carriage if the item being purchased is VATable.
It is not chargeable if the item being purchased is not VATable.

For example, if you`re supplying an aerial (like we do) that is VATable so the carriage amount you charge the customer is also subject to VAT.
On the other hand if you were supplying a non VATable product (like food for example) the carriage component is not VATable.

This must be right because, if you think about it, you could just make the item you`re supplying an artificially low price (or even free ! ) then charge an artificially high price for the carriage, then there`d be no (or minimal VAT) chargeable and therefore you could reduce the retail price to the customer.

There is an even more complicated supplementary point to this if you use the Royal Mail for your carrier. I hope I`ve got this right !
There is no VAT on (most) RM services, but, since what the customer pays you for the carriage is VATable you have to add on the VAT when calculating how much to charge them. For instance, if the cost of the stamps (or franking) is £5.00, you have to remember to charge the customer £6.00 to cover the VAT.
This has a further effect, in the aforementioned example the customer looks at the stamps (or franking label) thinks you`re making £1 on the carriage, which, of course, you aren`t !

Food for thought I think......

 

[Anna Chandley]

You are correct. When recharging postage to customers the VAT charge on the postage will be at the same rate as VAT charged on the product.

When Royal Mail suuply postage to you it is exempt but if you recharge the postage to your customers then you charge VAT at the same rate as the product being sold.

Just a slight correction re your statement about food. Food is VATable but in some cases it will be zero rated so VAT would be charged at 0% as would the associated postage.

There is a difference between zero rated (0% VAT charged) and exempt (no VAT charged) supplies.

Anna

 

[wayzgoose]

Yes, that's right. I remember when we had a high street shop, I was amazed at the amount of suppliers that added the carriage on the invoice after the VAT had been worked out.

 

[dianajofa]

The product I am supplying is free because it is a sample, but we are charging the carriage, I am assuming the carriage is subject to VAT as the product under normal circumstances would be subject to VAT.

 

[Raw Rob]

The product I am supplying is free because it is a sample, but we are charging the carriage, I am assuming the carriage is subject to VAT as the product under normal circumstances would be subject to VAT.

I would assume so too, because the price of the product is still £0.00 + 20% VAT so your postage will also be plus VAT. (Otherwise you would be able to sell a VATable product for free with £10 postage for example and bypass VAT, which clearly isn't the case.)