It is trending among people these days to get food delivered at home. Due to this, the high street business is super busy making a profitable set of rules. Services like digital subscriptions and food delivery are observing a surge for sure. If you are associated with e-commerce and you are now taking an interest to invest in being virtual. There must be several questions that you might wonder about and one of them is about the charges of delivery. As you desire to assure about VAT on shipping. This is challenging especially for the SMEs in the UK.
Certain rules belonging to businesses are there and this may vary as well. The choice of your delivery method matters to an extent that you opt for the delivery of your products. You should also consider the facts about the following listed points:
- Cost of postage
- VAT on delivery charges
- Purchasing of postage
In the case, you are wondering about similar points, we have got you covered here as we will talk about VAT on shipping, the exemptions and set of rules, delivery charges and what is HMRC’s take on this. We begin the discussion with how much VAT is allowed to charge on the delivery charges.
VAT On Shipping – Consider Salient Features
You are advised to consider the tax rule of the UK seriously when you are carrying out your business. The salient feature that you should know include the following listed and explained points:
1- The Delivery Service – Your Choice:
It depends on the type of delivery service that you aim to use for sending your products, which will decide about the VAT you will pay on the postage cost. If you do not pay VAT, this is obvious that you can not even reclaim it. There is no point. The businesses that are using the couriers and other delivery services will be charged VAT on delivery charges.
2- Delivered Good – What is the Item?
If you want to know about the VAT on your delivery charges, you will have to consider what item is there in the delivery and how is it treated. Is it a delivered good? For a better understanding, we will take an example of a business that believes to charge for the goods as well as the delivery. VAT will be charged on the total amount in such a case. This means the amount that you get after adding the delivery charges and the price of the product.
Now in the other case, a business that aims to charge for the goods delivered but there is no postage cost, there will not be any VAT factor involved. This means VAT will not be charged.
Can I Charge VAT on the Delivery Charges of My Products when it is zero-rated?
Generally, the answer to this very query is a no. The treatment of VAT depends on the supply of products normally. We will suppose a business that aims to make products like clothes for children and shoes. Now, this is not subject to VAT. There will not be any VAT factor involved in the delivery charges. Other businesses that are dealing in products like helmets, newspapers, and books will follow the same set of rules regarding the involvement of VAT.
You must be wondering if you can claim the VAT that you charged on the costs of postage. The good news is yes, you are allowed to claim VAT that is charged on the cost of postage. There is a condition that the postage services should be purchased by your business. This will make you eligible.
HMRC Set of Rules about VAT – Reflect your Business
The set of rules about VAT issues by HMRC is known to be quite complicated. The most complicated factor is the dependence of VAT charges on the goods. Also, the factors like who is involved in delivery, and if it is delivered well are salient features yet increase the complexity of this matter. There is also a consideration of from which country are you sending the products or which country s receiving the products. When it comes to the VAT charges, this really matters a lot.
What makes it more complex is that the set of rules must be reflected by the IT system of every business. Every step is considered and checked. All the relevant calculations must be accurate. The calculation includes what amount you are charging to your customers, if VAT is included or not, and if you will be able to claim VAT. In case the laws of the tax change in the country, the level of complexity increase again.
The Bottom Line
Now that you have gathered a fair amount of information about VAT on shipping, we can say that understanding VAT on delivery charges is easy to read, however, the implementation of rules with accuracy is a challenging task. You might need to hire an expert at this stage to make the process seamless. It is suggested to consider all the factors to make it an error-free process. We hope these few minutes of reading will help you to make the right choice.
Disclaimer: The information about VAT on shipping is provided in this blog including text and graphics in general. It does not intend to disregard any of the professional advice.