VAT charging

I notice that some suppliers quote the inc vat price on an invoice, then add the postage,etc, so vat is only charged for the item(s). Others quote the minus vat price, add the postage ,etc, then add the vat to the total, meaning we are also paying vat on the postage charge. This obviously makes an item a lot more expensive than it first looked and I wonder which way is correct.

Keith.

Doesn’t it depend on the postage charged? Might be lower if VAT added afterwards?

It pays to check the overall cost, unless one is not bothered about the price....

From Do you have to pay VAT on postage? – Sound Accounting Services

When you buy postage stamps or pay for standard postage for your franking machine, you’ll pay no VAT because “universal postage services” provided by the Post Office are exempt.

However

When you supply goods by post it counts as a single composite supply for VAT purposes. That means the postage is part of the total cost of the goods and so the VAT rate applicable includes the postage.

So charging VAT on the postage is correct. It gets more complex with zero rated goods and supplies to non UK customers.

That implies that those that add vat to the items only are incorrect. I hope I have not opened a can of worms here!

Keith

There is no right or wrong way to show prices. Generally consumer sites show VAT inclusive prices, since consumers are interested in the overall price they will pay. Sites aimed at business users generally show VAT exclusive prices as most businesses will be VAT registered and will offset the VAT paid out against VAT charged, so the net cost of an item is VAT exclusive. Shipping is usually plus VAT.

Andrew

And don't forget the "postage" charge will also include the cost of packaging not just what the post office or courier charge. Likely a VAT registered company will have had to pay VAT when they bought that jiffy bag so will be wanting to charge you VAT to reduce what they have to pay over to HMRC.

There is no rule about how firms present their prices to the customer. They will ususally chose to present pricing in the way which they belive will maximise conversion from enquiries.

But if they are not accounting for their postage costs in their VAT returns and they get investigated, then they will be stuck with a bill (or worse) from the VAT man.

Edited By Peter Cook 6 on 12/05/2021 14:28:49

If EOP VAT payable is that charged on Outputs less that paid for on Inputs any additional customer VAT charges will increase what VAT they have to pay, however the customer will have contributed to the sum paid.

Emgee

Hi Keith no they are correct providing they are not vat registered i.e. their turnover is below the vat threshold. With mail order if you are vat registered the postage you buy on behalf of the customer becomes a service and is thus liable for vat, if you are not vat registered you cannot or should not issue a vat invoice and thus there is no need to add vat to any service you provide.

A vat registered trader can of course absorb the vat applicable to the postage, however they should IMO still show the goods plus freight plus vat on the invoice particularly if it is going to a vat registered person/company. To private individual it makes no real difference because they cannot reclaim the vat.

John

edit spelling !

Edited By JohnF on 12/05/2021 17:02:00

I don't believe that to be the case. In th UK retail prices have to be shown VAT inclusive. Companies that sell to both the general public and to the trade tend to show both prices. Screwfix, for example, have a button to show VAT or not.

Rod

Unless it's changed since I was trading any VAT charged should be shown as a separate entry with the rate of VAT chargeable, also the trader's VAT Registration number should be printed on the invoice so it can be checked if they are currently VAT registered or just upping the bill by a considerable amount.

Emgee

Edited By Emgee on 12/05/2021 18:51:30