Extra vat being charged on shipping.

[Romerz]

I can't see what im doing wrong, however ill give you an example of an order.

Qty: 2
Unit Price: 42.54
Total Cost: 85.08

Subtotal: 85.08
Shipping: 6.00
Vat: 15.94

Total 107.02

The total should be 105.96

For some reason it is calculating the VAT(85.08+6.00) rather than VAT(85.08) + 6.00.

My other main site works perfectly fine, and I can't see to find any differences in the way they are set up.

[Mike Hughes]

Shipping is VATable so Actinic is adding VAT to the shipping charge.

V9 (still in beta testing) has much better VAT support and can include the VAT in the displayed shipping price.

Mike

PS. Your other sites probably have the Shipping VAT set to 0%. It looks like this one doesn't.

[guccij]

Strictly speaking, shipping does not attract any VAT at all. That's if you charge Royal Mail rates. Stamps are zero-rated for VAT ergo so is franked mail.

However, if there is a handling element incorporated into your shipping charge, then you must add 17.5% VAT.

The same applies to couriers (other than ParcelForce). VAT should be applied to courier charges.

Personally I find it easier to charge the exact shipping rate, and put the handling and packing element into the product price so the VAT is all taken care of there.

[TraceyHand]

I think you need to look into that closer because I believe you are incorrect.

Regardless of whether YOU pay VAT to Royal Mail or Parcelforce, if you are registered for VAT, you MUST charge VAT on your shipping.

It's been discussed many times on the forum.

[Mike Hughes]

Tracey is correct.

It doesn't matter whether Royal Mail charge you VAT. That's an irrelevance.

HMCE Vat guides are very explicit on the matter. You can find more on their website.

It's been discussed on the forum before with full details from HMCE and references.

Mike

[Romerz]

Thanks for the help everyone

[guccij]

Tracey is correct.

It doesn't matter whether Royal Mail charge you VAT. That's an irrelevance.

HMCE Vat guides are very explicit on the matter. You can find more on their website.

Not according to my (ex) HMRC inspector accountant...

"Postal services provided by the Post Office are exempt from VAT, but this exemption does not extend to similar services provided by other suppliers, even where this might be seen as being in direct competition with the Post Office. However, if any delivery charge you make to your own customers includes the cost of stamps you buy from the Post Office you may have to charge VAT on the whole amount including the cost of those stamps."

I don't charge extra for delivery. I charge what it actually costs in postage.

[wjcampbe]

Not according to my (ex) HMRC inspector accountant...

That why s/he is (ex)

The reason postage/shipping is VATABLE on your site, is because it is classed as a SERVICE that you are providing to your customers. ALL services that you supply are subject to VAT.

If you do decide to ignore this, please start a little deposit account to accumulate some cash to pay the inevitable fine(s).

[LesleyN]

VAT & Shipping Charges

I just wanted to add another complication to VAT and shipping.

I've had it confirmed by my local VAT office that I can do the following:
• when I supply zero rated supplies I don't have to account for VAT in the shipping charge as shipping the goods is part of the order,
• if the goods have a VAT element then I do have to account for VAT in the shipping charge,
• if the supply is mixed then I account for VAT if 50% of the order is VAT able!

It's a real pain to do any of this is actinic (I use business V8) so my vat returns take ages and lots of editing in sage- however it does save an awful lot of money!
Notice 700 - The Vat Guide Page 47 second box of text says:
If the terms of your agreement with your customer for the supply of the goods require you to deliver or post them to the customer…..there is no separate supply of delivery or postage. This applies even if you show a separate charge. This means that you make a single supply of delivered goods and if the supply of the goods is zero rated, then the zero-rating also covers the delivery or postage. This applies to most mail order transactions, but not if a delivery service is available at an extra charge for customers who request it.
So there you go – any of you supplying zero rated goods may be able to save yourself a small fortune.
Cheers
Lesley

Ps – does anyone know if V9 is better with having custom vat codes?

[leehack]

How does it save you a small fortune? Surely if you incorrectly charge VAT, you should also pass it on otherwise you are falsely charging, whereas if you haven't charged for it, then you have nothing to save?

Are you suggesting that you charge customers VAT incorrectly and then compound that error by keeping it yourself or have I misunderstood what you are saying?

[TraceyHand]

I don't quite get that either.

If you charge it (rightly or wrongly) then you should be paying it to the vat-man. Your paperwork etc will show you've initially charged it so it's difficult to argue the case, if you come under inspection.

Actinic can be set up to charge 'pro-rata' VAT on shipping, meaning it only charges relative to the tax rates of the products sold.
ie..zero rated sales = zero vat on shipping..
taxable sales = taxable shipping
combined sales = pro-rate vat on shipping.

We have to use this as we sell some zero rated goods and some (majority) taxable and it works fine, keeping things 'straight' should the VATman decide to pay us a visit.

I certainly don't see how it's a scenario where we can benefit particularly.
I think what you are trying to say is that you can charge the same 'gross' amount for the shipping, regardless of vat-band of the products?

ie...shipping is (example for ease of calculation) £10 on zero rated goods... £8.51 plus £1.49 VAT on 17.5% rate goods..so, if you sell zero rated, you 'gain' by £1.49?

Trouble is, Actinic doesn't charge it like this (and, probably, neither should you)
Actinic will charge your zero rated order at £8.51.
Maybe this is what you are referring to?

[LesleyN]

Hi guys,
I didn’t explain it very clearly did I. Tracy is right in that we charge the same 'gross' amount for the shipping, regardless of the vat-band of the products- the customer receives a VAT receipt (from our accounts software) detailing if there is an element included in the shipping for VAT or not. Therefore our paperwork is correct and we pay the correct VAT due. When I said we save a small fortune – Tracy’s example explains how:
i.e...shipping is (example for ease of calculation) £10 on zero rated goods... £8.51 plus £1.49 VAT on 17.5% rate goods..so, if you sell zero rated, you 'gain' by £1.49?
However, as a newbie with Actinic I didn’t realise the pro-rata tax band would calculate the vat in shipping as described by Tracy. This would make my life so much easier as I’m currently doubling up on work by transferring all orders to the accounts software to process to ensure that the customer receives the right information.
I’ll get onto changing the VAT in actinic straight away and this should now make everything clearer for my customers and easier for me – many thanks Tracy.
Cheers
Lesley