VAT Question

[eCommerce63]

I have an VAT registered online business where I sell products and charge for postage and I am currently writing some software to analyse how well/or not we are doing.

My question is, if turnover for month was £10,000, and £500 of that figure was postage paid by the customer, would VAT be calculated on the £10,000 figure or the £9,500 figure???

 

[Scalloway]

If you charge VAT on an item you post out you must charge VAT on the postage. If it is zero rated you don't charge VAT on the postage.

 

[eCommerce63]

If you charge VAT on an item you post out you must charge VAT on the postage. If it is zero rated you don't charge VAT on the postage.

Maybe I am doing everything wrong then - we charge VAT on the item but not on the
postage. So for instance if we have a product we are selling at £10, customer is charged
£10+VAT = £12. They then pay postage eg £3 so total invoice is £15.
Are u saying we should be charging £13 + VAT = £15.60 ? :| I thought postage charges
did not attract VAT

 

[Scalloway]

You do not pay VAT on the purchase of stamps but you do charge VAT if the item being posted attracts VAT.

HMRC info here

http://customs.hmrc.gov.uk/channels...HMCE_CL_000114&propertyType=document#P41_3217

 

[eCommerce63]

You do not pay VAT on the purchase of stamps but you do charge VAT if the item being posted attracts VAT.

Thanks for the responses - but I am still not clear on this.

Based on what you are saying, in the previous example if we sell
a product at £10 online and charge £3 postage, what should the Invoice total be?
(We take the package to a PO and send via Royal Mail, and product attracts VAT
at a rate of 20%)

 

[Scalloway]

The total cost would be £13 plus VAT of £2.60 (20% of £13). If the item was zero rated the total cost would be £13.

 

[eCommerce63]

The total cost would be £13 plus VAT of £2.60 (20% of £13). If the item was zero rated the total cost would be £13.

Thanks .... that means our Website has been set up incorrectly
We were told no VAT on the postage when we asked. The website only seems
to calculate VAT on the product sale and then adds the P&P on. So in the example
above the Total Invoice generated on our site would be for £15 and not for £15.60 as
you describe. Our first VAT bill is due around now, so I guess it'll sting a bit more than
expected as we haven't been charging enough.