VAT on delivery charges (ecommerce)

[jon-]

My head is hurting a little so I thought I'd ask the question here.

In the past I've purchased many things online, and nearly universally not been charged VAT on delivery (on the invoice, the VAT sum is before the delivery charge is added on) whether the item was vatable or not, and using many couriers.

I thought I'd double check this and HMRC seem to indicate that the VAT on the delivery should follow the VAT on the item, EG if it's a vatable item you should charge VAT on delivery.

They then go on to say if delivery isn't required under the contact, you don't have to charge VAT.

So, eCommerce boys, if you sell vatable items to customers, do you account for VAT on your delivery charges?

Full notice: http://customs.hmrc.gov.uk/channelsPortalWebApp/ch...

[rpguk]

My understanding was that the ecommerce store is providing a delivery service (even if this is subcontracted out to a courier/RM) and that's a VATable item. Therefore if VAT registered should charge VAT on it.

I say that as someone who is involved in ecommerce rather then an accountant and I've never had any problems with HMRC despite inspections having taken place.

[jon-]

After a little research I agree with that understanding, however some people appear to be using the loosely worded second statement to avoid it.

Hmm.

[daemon]

jon- said:

After a little research I agree with that understanding, however some people appear to be using the loosely worded second statement to avoid it.

Hmm.

Avoiding it only until they have a VAT inspection methinks - just because they havent charged it doesnt mean it isnt payable (and will be retrospectively)

Edited by daemon on Tuesday 31st May 22:45

[davepoth]

You've read it a bit wrong I think. delivery is definitely VATable.

[JonRB]

You definitely have to charge VAT on delivery, even if your carrier does not charge you VAT (eg. Royal Mail).

I'm 100% sure on that.

[jon-]

All agreed, thanks guys.

[arcturus]

As you point out, on some accounting software the totals appear like this:

Net
VAT
Delivery
Total

giving the impression that VAT is not charged on the delivery portion. However if you do the sums, you often find that, infact VAT has been charged on delivery.

For example:

Net: 100.00
VAT: 22.00
Delivery: 10.00
Total: 132.00

In reality, the Net total in this example is £110.00.

Sage based software in particular does this and i for one find it very annoying!!

[Dave_ST220]

My accountant said the only time VAT can not be applied is if your customer pays the exact Royal Mail cost. That was a while back & I may be recalling is wrong but 99% sure.......

[JonRB]

Dave_ST220 said:

My accountant said the only time VAT can not be applied is if your customer pays the exact Royal Mail cost. That was a while back & I may be recalling is wrong but 99% sure.......

Sounds like a sticky wicket to me. You'd have to argue with HMRC over who was paying Royal Mail. And they would strongly argue that you are and hence they are due the VAT.

It's also worth noting that most couriers are VAT-rated, which means you can claim the VAT back, whilst Royal Mail is VAT-exempt. Therefore always compare ex-VAT prices when comparing carrier costs.