How does VAT apply to UK dropshipping businesses?

[LisaBeck]

Hi

I have a business that is VAT registered. If I dropship can someone tell me where the VAT applies?

eg

I have a product listed which is wholesale £40

I sell it for £100

Does VAT apply on the £100 total cost, or the £60 profit?

If it's the total cost - would I get VAT relief on the wholesale price?

[Rostislav]

HI Lisa, 

VAT always applies to the sales price , unless you are on VAT margin scheme (it cannot be supported by Shopify), so you charge VAT on 100 GBP in your store . The question is where do you dropship from . If you dropship from within UK you can claim input VAT on your purchase (on 40 GBP) , so you end up paying VAT on the profit (60 GBP) . If you dropship from abroad to the UK you will pay VAT on 100GBP