Could someone please help me work out VAT owed in this ex

[Phooey]

VAT registered business selling on an online platform eg Amazon -

Zero-rated item (Book) - selling price £10.00 + £2.80 postage (total the buyer pays = £12.80). Am I correct in assuming because the item (book) is zero-rated the shipping cost (£2.80) also follows the VAT rating of the item and therefore no VAT is owed from the seller to the government?

VAT-rated item (DVD) - selling price £10.00 + £2.80 postage (total the buyer pays = £12.80). The item (DVD £10.00) is VAT rated so seller owes the government VAT (works out at £1.67 on £10.00). Confusion is - does the seller owe the gov VAT on the postage (£2.80) as well? In other words - does seller pay gov £1.67 or £2.13 (£10.00 + £2.80 - total £12.80)?

Couple of points -

Postage - Seller uses Royal Mail as courier for all above examples via an account with Royal Mail - Royal Mail charges seller weekly / fortnightly and VAT is included and shown on Royal Mail invoice (supplied by Royal Mail - nothing to do with Amazon). Obviously seller is reclaiming VAT on this invoice.

Amazon - If seller gives Amazon VAT number then Amazon does not charge VAT on services (selling fees - commission on item and postage) so no VAT is paid to Amazon (Amazon is registered in Luxembourg)

Thanks

[cherie171]

Phooey said:

Zero-rated item (Book) - selling price £10.00 + £2.80 postage (total the buyer pays = £12.80). Am I correct in assuming because the item (book) is zero-rated the shipping cost (£2.80) also follows the VAT rating of the item and therefore no VAT is owed from the seller to the government?

No VAT is owed on either the item or the postage.

Phooey said:

VAT-rated item (DVD) - selling price £10.00 + £2.80 postage (total the buyer pays = £12.80). The item (DVD £10.00) is VAT rated so seller owes the government VAT (works out at £1.67 on £10.00). Confusion is - does the seller owe the gov VAT on the postage (£2.80) as well? In other words - does seller pay gov £1.67 or £2.13 (£10.00 + £2.80 - total £12.80)?

VAT is owed on both item and postage as it is a single composite supply and the liability of the postage charges follows that of the goods.

The only exception would be if the items are sent outside of the UK, in which case, no VAT applies.

Edited by cherie171 on Tuesday 22 May 12:22

[Phooey]

cherie171 said:

VAT it owed on both item and postage as it is a single composite supply and the liability of the postage charges follows that of the goods.

The only exception would be if the items are sent outside of the UK, in which case, no VAT applies.

Brill - thanks cherie171

Now for the second part

VAT-rated item (DVD) - selling price £10.00 + £2.80 postage (total the buyer pays = £12.80).

Amazon seller fees (payable by seller) are 15% of the TOTAL price (£12.80) the customer paid, plus an additional £0.50p Closing Fee. So, total Amazon fees on this £12.80 sale is £2.42 (15% of 12.80 = £1.92 + £0.50 Closing Fee = £2.42).

Amazon returns to seller after fees - £10.38 (£12.80 minus £2.42 = £10.38)

Does seller owe the gov VAT on £10.38 (£1.73) or on total price customer paid (£12.80. VAT = £2.13)

Basically I'm trying to work out if you can deduct Amazon seller fees (commission) before working out VAT payable to gov, or is VAT simply owed on TOTAL price your customer pays irrespective of other costs eg seller fees / commission.

Thanks again

[Eric Mc]

cherie171 said:

The only exception would be if the items are sent outside of the UK, in which case, no VAT applies.

There are different VAT rules dependent on whether the customer is -

Inside the EU

Outside the EU

A VAT registered trader inside the EU.

[Phooey]

For this example seller is based and registered in the UK and is solely selling in the UK

[cherie171]

The VAT you owe is on the total sales price. If Amazon were charging you VAT, then you could deduct this from the amount owed.

By deducting their fees, all Amazon is negating the need to send you the full sales amount, and then invoicing you for the fees at a later date.

[cherie171]

Eric Mc said:

There are different VAT rules dependent on whether the customer is -

Inside the EU

Outside the EU

A VAT registered trader inside the EU.

As I would expect the majority of Amazon sales to be personal, the matter of selling to a EU VAT registered business is unlikely, and not really applicable in the example.

I know assumptions shouldn't be made, but I was trying to keep it simple for the OP.

[Phooey]

cherie171 said:

The VAT you owe is on the total sales price

Gotcha. I was hoping it was only on the item and not on the postage.... I guess this stops you selling the item for 1p and increasing postage to £12.79

cherie171 said:

I know assumptions shouldn't be made, but I was trying to keep it simple for the OP.

And I appreciate you keeping it simple Cherie - thank you. What would of been more useful to the thread is Eric contributing / answering my questions rather than pick at your reply.


Thanks again Cherie

[cherie171]

No problem! Working in accounts for 20 years does have its uses now and then.

[Eric Mc]

cherie171 said:

Eric Mc said:

There are different VAT rules dependent on whether the customer is -

Inside the EU

Outside the EU

A VAT registered trader inside the EU.

As I would expect the majority of Amazon sales to be personal, the matter of selling to a EU VAT registered business is unlikely, and not really applicable in the example.

I know assumptions shouldn't be made, but I was trying to keep it simple for the OP.

I have many business clients who buy stuff through Amazon so it was worth making the point, I would suggest.

As you say yourself, don't make assumptions.

[Eric Mc]

Phooey said:

And I appreciate you keeping it simple Cherie - thank you. What would of been more useful to the thread is Eric contributing / answering my questions rather than pick at your reply.


Thanks again Cherie

I sometimes wonder why I bother to be honest. If you had asked me, as a client, the original question, I would have asked you if you were supplying to a business or a private customer and I would also have asked if it was a EU or a non EU customer.

[singlecoil]

Eric Mc said:

Phooey said:

And I appreciate you keeping it simple Cherie - thank you. What would of been more useful to the thread is Eric contributing / answering my questions rather than pick at your reply.


Thanks again Cherie

I sometimes wonder why I bother to be honest. If you had asked me, as a client, the original question, I would have asked you if you were supplying to a business or a private customer and I would also have asked if it was a EU or a non EU customer.

The rest of us are very glad that you bother, Eric.

[KevinCamaroSS]

Phooey said:

What would of been more useful to the thread is Eric contributing / answering my questions rather than pick at your reply.

Never forget you are asking for free advice, your own accountant would likely charge for this. Eric is a very valued contributor to this forum and is seldom (never) wrong.

[Eric Mc]

KevinCamaroSS said:

Never forget you are asking for free advice, your own accountant would likely charge for this. Eric is a very valued contributor to this forum and is seldom (never) wrong.

Thanks for the support but I don't always get it right either.