So I'm about to launch my business and I am in the final stages of setting up my page before I go live.
I have done a fair bit of research into setting up tax and I am still completely lost. It seems to be a complete minefield from a Northern Ireland stand point and there seems to be a lot of confusion, so if anyone can shed any light on this for me it would be very much appreciated.
Here is a summary of my situation:
- Based in Northern Ireland
- Selling products worth approx £10. I am estimating that the average order will be £10-£20
- Not VAT registered at this time
- I have my EORI and XI numbers
- I am planning to ship to customers worldwide
- Do I need to register for VAT? I don't really want to have to add 20% if not required.
- Should I apply tax to my products or what areas do I need to apply it to?
- Does anyone know the tax requirements for shipping NI -> UK, NI -> EU and NI -> Other zones?
- Should I show prices with tax included?
- How do I incorporate DDP shipping? I don't want my customers to be charged any import costs.
There are just so many issues here and no one seems to know the answers. Even with this post I feel like I'm only skimming the surface of the complexities to hurdle... Its crazy!
Thanks for any help in advance,
Thank you for getting in touch and for detailing your situation. Taxes can be confusing at the best of times, but I know for merchants in the UK—and especially in Northern Ireland—things have certainly become more complicated post-Brexit. I don't have all the answers but will do my best to answer your questions and provide resources to help you better understand your tax obligations.
I'll answer your questions one-by-one:
Do I need to register for VAT? I don't really want to have to add 20% if not required.
The requirements for VAT registration are set by HMRC, and you can find out more on their website. At the time of writing, the government states that businesses that have a VAT taxable turnover of £85,000 or more in the past 12 months must register for VAT, or if they expect this threshold to be exceeded in the next 30 days. Please note that this is a general rule and there may be other circumstances that require you to register for VAT, but if you are just launching your business you likely do not need to register for VAT at this point.
Should I apply tax to my products or what areas do I need to apply it to?
As per our documentation on Brexit and the resulting tax implications, orders shipped from Northern Ireland to elsewhere in Northern Ireland, the rest of the UK, or to anywhere in the EU, UK VAT is charged but only if you and and your business are VAT-registered. As mentioned above, you likely do not need to register for VAT at this point and therefore will not be required to charge sales tax if selling to customers in the UK or the EU. However, please bear in mind that this is generalized guidance, and may not apply directly to your store.
Does anyone know the tax requirements for shipping NI -> UK, NI -> EU and NI -> Other zones?
The documentation I shared above includes a table that includes information on what VAT should be charged when orders are shipped from Northern Ireland:
If a business is located in Northern Ireland and registered for UK VAT, then UK VAT is charged if a sale is made to a customer in Northern Ireland, the rest of the UK, or the European Union.
In terms of selling internationally, such as to the US, the tax laws vary by country, region, and state, and whether or not you need to register for, charge and pay taxes depends on different factors. These may include whether your business has a physical presence in a jurisdiction, and/ or how much revenue you generate from sales into that region. As a general piece of advice, I would recommend first focus on selling more locally (e.g. the UK and EU) before focusing on international sales, just to ensure you are set up correctly and know your tax responsibilities for everywhere you sell products to.
Should I show prices with tax included?
If you are based out of the UK and plan to sell in the UK, then yes, you should include prices with taxes included. I believe this is a requirement for businesses located in the UK. However, you should only worry about this if you do determine that you are required to charge VAT to your customers.
How do I incorporate DDP shipping? I don't want my customers to be charged any import costs.
Can you tell me more about where you intend to ship to that may incur import costs? I believe such a service would depend on which courier you're using, and where you intend to ship to.
I hope the above information is of some use to you, and please do ask more questions if you have them. I would also encourage you to seek advice from a tax professional if you are not confident in your understanding of what your tax obligations are in the places you wish to sell to.
Victor | Shopify Social Care
No problem at all. Please get back in touch if you have more questions.
Victor | Shopify Social Care