VAT on postage???!!!

martindow

desmcmanus wrote: »

Vat is being added to some Royal Mail services from 31st January 2011 but not the majority of postal services. For more information visit - postage-vat.co.uk.

According to that site VAT will only be added to Special Delivery and Airsure. That will be a 20% rise. All the rest will continue to be VAT free.

mykeblack

Does anyone know what happens when you sell both zero rated and standard rated items at the same time?

For example, if I had an online shop that sells books and mugs, and someone in the UK orders a book at £20 and a mug at £10 at the same time, do I need to add VAT on the whole shipping charge? or calculate the VAT on 1/3 of the shipping charge? or is it the case that if over 50% of the goods are zero rated then you do not charge for VAT on shipping?

The HMRC website does not have any information on what happens in this information as far as I've found.

JasonLVC

mykeblack wrote: »

Does anyone know what happens when you sell both zero rated and standard rated items at the same time?

For example, if I had an online shop that sells books and mugs, and someone in the UK orders a book at £20 and a mug at £10 at the same time, do I need to add VAT on the whole shipping charge? or calculate the VAT on 1/3 of the shipping charge? or is it the case that if over 50% of the goods are zero rated then you do not charge for VAT on shipping?

The HMRC website does not have any information on what happens in this information as far as I've found.

http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortalWebApp.portal?_nfpb=true&_pageLabel=pageVAT_ShowContent&id=HMCE_CL_000102&propertyType=document#P137_13080

Scroll down to Section 6.

You need to ask the question "What is my customer actually buying?" Are they buying a seperate book and seperate mug or are they buying one item which consists of a book and a mug?

For example, if I go to Amazon and buy a book by Tony Blair and an MP3 player, they are clearly two seperate supplies. If I buy a commemorative Royal Wedding book which comes with a commemorative mug then arguably this is a single supply.

So how to apportion the VAT where you have two seperate items?

Visit this link :- http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortalWebApp.portal?_nfpb=true&_pageLabel=pageVAT_ShowContent&id=HMCE_CL_001544&propertyType=document#P43_2392

Scroll down to Section 32 where there is an example at 32.2.1 which is exactly your scenario - a zero rated item and a standard rated item, two seperate items purchased at the same time.

So easiest thing to do is to add the purchase price and postage price together to form a single price and then apply the methodology described in the link to arrive at the VAT owed to HMRC.