VAT on Delivery Charges

Discussion in 'Accounts & Finance' started by raredvd, Jun 6, 2008.

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  1. raredvd

    raredvd UKBF Newcomer Free Member

    33 1
    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.
     
    Posted: Jun 6, 2008 By: raredvd Member since: Feb 20, 2008
    #1
  2. Courir

    Courir UKBF Newcomer Free Member

    154 26
    Here you go - the official line from HM Customs here.

    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
     
    Posted: Jun 6, 2008 By: Courir Member since: May 12, 2008
    #2
  3. raredvd

    raredvd UKBF Newcomer Free Member

    33 1
    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!
     
    Posted: Jun 6, 2008 By: raredvd Member since: Feb 20, 2008
    #3
  4. Top Hat

    Top Hat UKBF Ace Free Member

    2,182 172
    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?
     
    Posted: Jun 6, 2008 By: Top Hat Member since: Mar 3, 2005
    #4
  5. raredvd

    raredvd UKBF Newcomer Free Member

    33 1
    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?
     
    Posted: Jun 6, 2008 By: raredvd Member since: Feb 20, 2008
    #5
  6. Guest

    0 0
    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.
     
    Posted: Jun 6, 2008 By: Member since: Jan 1, 1970
    #6
  7. jholden

    jholden UKBF Newcomer Free Member

    316 62
    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
     
    Posted: Jun 6, 2008 By: jholden Member since: Apr 5, 2005
    #7
  8. deniser

    deniser UKBF Legend Free Member

    8,104 1,702
  9. raredvd

    raredvd UKBF Newcomer Free Member

    33 1
    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
     
    Posted: Jun 6, 2008 By: raredvd Member since: Feb 20, 2008
    #9
  10. rajajang

    rajajang UKBF Newcomer Free Member

    15 0
    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.
     
    Posted: Jun 6, 2008 By: rajajang Member since: Jun 6, 2008
    #10
  11. elainec100@cheapaccounting

    [email protected] UKBF Newcomer Full Member

    13,268 2,883
    Well that is their problem really - you must account for it as detailed otherwise it will be a problem for you later.
     
    Posted: Jun 6, 2008 By: [email protected] Member since: Nov 4, 2005
    #11
  12. raredvd

    raredvd UKBF Newcomer Free Member

    33 1
    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?
     
    Posted: Jun 6, 2008 By: raredvd Member since: Feb 20, 2008
    #12
  13. Top Hat

    Top Hat UKBF Ace Free Member

    2,182 172
    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
     
    Posted: Jun 6, 2008 By: Top Hat Member since: Mar 3, 2005
    #13
  14. elainec100@cheapaccounting

    [email protected] UKBF Newcomer Full Member

    13,268 2,883
    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.
     
    Posted: Jun 6, 2008 By: [email protected] Member since: Nov 4, 2005
    #14
  15. raredvd

    raredvd UKBF Newcomer Free Member

    33 1
    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.
     
    Posted: Jun 6, 2008 By: raredvd Member since: Feb 20, 2008
    #15
  16. deniser

    deniser UKBF Legend Free Member

    8,104 1,702
    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.
     
    Posted: Jun 6, 2008 By: deniser Member since: Jun 3, 2008
    #16
  17. Freight Search

    Freight Search UKBF Newcomer Free Member

    1 0
    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.
     
    Posted: Jun 6, 2008 By: Freight Search Member since: Jun 6, 2008
    #17
  18. raredvd

    raredvd UKBF Newcomer Free Member

    33 1
    So the Royal Mail won't apply VAT to deliveries?

    I think its time to call HMRC.
     
    Posted: Jun 6, 2008 By: raredvd Member since: Feb 20, 2008
    #18
  19. raredvd

    raredvd UKBF Newcomer Free Member

    33 1
    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.
     
    Posted: Jun 6, 2008 By: raredvd Member since: Feb 20, 2008
    #19
  20. elainec100@cheapaccounting

    [email protected] UKBF Newcomer Full Member

    13,268 2,883
    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/channels...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!
     
    Posted: Jun 6, 2008 By: [email protected] Member since: Nov 4, 2005
    #20
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