I am in the process of setting up a online ecommerce business supplying goods online directly to customers.
I have registered for VAT and also receieved my VAT number.
Purchases of the goods have come from Germany and UK.
The business itself will be functioning from my parents home in the loft, as i slowly try and grow the business.
I have decided to incorprate the VAT in the Retail Recommended Price when i sell the products/goods to customers online.
Any advice on the following matters will be greatly appreciated:
1) The supply of goods will be made to UK, Europe and internationally to customers who purchase the product, I wanted to know what the VAT rules are on charging VAT to European customers, and internationally.
2) The condition of the supply of goods will be that any customer who purchases the products will need to pay Postage as they will not be able to pick up the goods. Do i need to charge VAT on the postage, if supplied to the UK, Europe or internationally, or is it exempt, zero rated?
Any help or advise will be greatly appreciated.
Thanking all contributors for their help in advance.
regards
Steve
Steve
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Replies (5)
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Beware of pitfalls
Steve
EU trade and VAT is a pain: there are threshholds - check with HMRC - above which you have to submit monthly and quarterly reports a) for statistical purposes and b) so that HMRC can check up on your EU customers. Be very careful to select software that can deal with this. Ours is supposed to and can't, although it's a big name package. I have to do it manually, and it is a nuisance, particularly as you can get fined perfunctorily if you accidentally forget to fill in the return.
Secondly, be aware that as a UK registered buyer, any EU suppliers should invoice you free of their national VAT, and you actually don't have to pay the UK VAT on entry in the country. You account for the VAT at the end of your VAT period by adding what they call "acquisitions VAT" to your inputs and then deducting it again. Excellent for cash-flow. Despite being at the root of the "carousel" scandals, this friendly system is incredibly still in place, unless you deal in the "carousel" type of goods, of course. Good luck with your venture.
You are not supplying postage services
You are supplying goods delivered to the customer and the whole invoice is VATed or not depending on the status of the customer.
Only if your contracts are set up so you contract the postage as agent of the customer could it be treated as a ZR disbursment, but that leads to all sorts of problems re billing, insurance and so on.
B2C
Many thanks to all who kindly contributed their advice to my question.
I am hoping much of the business will be UK based, and from from meetings with suppliers i have been advised that most of their products sell in the UK, with some EU and International customers.
One of my main supplier of garments is from Germany, where i understand VAT is charged at 19%, my first purchase order shows 0%VAT has been charged as i have a valid UK VAT number.
My other suppliers are all UK based and VAT will be reclaimed or paid where neccessary.
My main concern was that my web developer wanted to know how to show the charge on VAT and postage when a customer reaches the payment stage on the check out.
I wasnt sure if i should charge VAT on postage, as i believe its exempt from VAT, and many of the other competitors have a flat fixed rate charge on postage inclusive of VAT and others have not shown if they have charged VAT on the postage.
kind regards
Steve
B2B or B2C?
Ian - you are quite right. I was working on the basis that this was probably a B2C, rather than B2B. What you've highlighted is the importance for Steve of getting the right back-end software to deal with the possibility of B2B transactions.
That will mean having to check that VAT numbers are in the correct format, and that they are valid VAT numbers. I don't have the detailed knowledge of the software that is available to do this sort of e-transaction, but there will be something out their that can cope with it. (Steve, you'd better spend some time researching the software you intend to use to process the purchases from outside the UK.)
Robert
Distance selling is the term...
1) The supply of goods will be made to UK, Europe and internationally to customers who purchase the product, I wanted to know what the VAT rules are on charging VAT to European customers, and internationally.
You will have to charge UK VAT on all sales to customers in the EU. There's no VAT on sales to customers outside the EU, but you do need to get proof of export.
If the level of sales to another EU country exceeds the registration threshold for distance sales to that country, you'll have to register in that country - hmm! potentially a lot of VAT returns to deal with.
2) The condition of the supply of goods will be that any customer who purchases the products will need to pay Postage as they will not be able to pick up the goods. Do i need to charge VAT on the postage, if supplied to the UK, Europe or internationally, or is it exempt, zero rated?
The postage usually takes the same liability as the goods you are selling.