Regional Support: Taxes (UK)

[Victor]

Learn more about collecting and managing taxes while running your Shopify store in the UK.

This thread is part of the Regional Support threads offered for merchants in the United Kingdom. To see which other topics are available, you can visit the UK hub here.

The prices of most products sold in the United Kingdom are tax-inclusive, meaning the sales tax (VAT) is included in the price. The standard VAT rate in the UK is currently 20%. To display tax-inclusive pricing, you can adjust your settings to show prices with tax included:



Customers who are required to pay VAT will see the amount of tax that they have paid at checkout and in their order confirmation. Customers who are not required to pay VAT will still pay the full price at checkout, but will see a VAT/ sales tax rate of 0% when making their purchase.

In an example taken from my test store, this first screenshot was taken at checkout when I proceeded with a UK address, making me eligible for taxation:



However, when I change my address to one from the United States, a location where I do not collect taxes, the price remains the same but no VAT is charged:



If you want to be able to charge a lower price for customers who are not required to pay VAT, you can opt to disable the “Show all prices with tax included” option in your tax settings and set all prices for your products to be the pre-VAT rate. This means that customers who are required to pay sales tax will see the appropriate VAT added to their order at checkout, whilst customers who are not required to pay VAT will see no sales tax added. To do this, you will want to ensure that the option shown in step 2 here is disabled:

If this is what you decide to do, then you may also want to list the VAT-inclusive price on your product pages alongside the VAT-exclusive price. We offer a guide on how to do this over at our Help Center.

Shopify is unable to offer direct tax advice to merchants. If you’re unsure of your tax obligations as a business operating in the UK, then we recommend consulting a tax expert for professional advice. We offer our own documentation on setting taxes for merchants outside of the United States and Canada, and you may also find some of these third-party resources helpful: 

• HM Revenues and Customs
• Gov.uk Business Tax
• Gov.uk Business and VAT
• Gov.uk Business Registration
• VAT Calculator
• What tax rates do small businesses pay?

If you have a question or comment to make about managing your taxes with Shopify in the United Kingdom, please post it below.

[tyrra000]

What settings should I apply, If I'm earning less than £85,000 in taxable turnover? 

[Victor]

Hi @tyrra000,

Thank you for reaching out with your question. As you're probably aware, the £85,000 figure you referenced is the taxable turnover threshold for which you must register your business for VAT with HM Revenue and Customs. You can read more about this on the UK government's website.

If your business' VAT taxable turnover -  the total value of everything you sell that is not exempt from VAT - is under this £85,000 threshold, and will not hit this threshold in the next thirty days, you do not need to register for VAT with HMRC. If your business is not registered to pay VAT in the United Kingdom, you should not need to charge UK-based customers VAT when they place orders on your Shopify store. This can be configured in the Shopify admin.

If you head to Settings > Taxes, you should see the United Kingdom as a region listed here. If you are marked as "collecting" for taxes in the UK, you can press "Edit" - this will then give you the option to change the rate of tax charged:

Changing this figure from 20% to 0% and then saving will ensure no taxes are charged to customers in the United Kingdom when they checkout.

As with all tax-related enquiries, I'd recommend doing your own research into you and your business' tax obligations, and to consult with a tax professional if you are unsure on what you need to do. I'd also recommend checking out some of these third-party resources on this topic for additional advice:

• Should I charge my clients VAT?
• Registering for VAT - what you need to know
• Understanding Sales Tax (VAT) in the UK and Europe

I hope this has helped clarify things but please let me know if you have more questions.

Kind regards,

Victor | Shopify Social Care

[tyrra000]

Thank you so much! I understand it much better now.

[tarung17]

Hi I am just starting a new store ,I really do not know what will be my sales but I want to start as sole trader now to save accountant bills but as and when sales revenue hit more than 30K in a year I plan to open Ltd company. In order to change from sole trader limited company in future, should I just change the payout account details on shopify addmin and change privacy policy etc on website. Is there anything else I need to consider during that time as I want to plan in advance. Also at what revenue does Shopify notify the HMRC about revenue I assume its $20K for USA. 

[Victor]

Hi @tarung17,

Thank you for reaching out with your questions. In terms of switching from a sole trader to a limited company, I'd recommend updating any documentation on your site that says otherwise with the updated information. I'd also suggest checking out the steps to creating a limited company on the government's official website.

For merchants with a US Shopify Payments account, Shopify will file a 1099-K form to the IRS when the merchant has made a minimum number of transactions and amount of revenue in a year. I do not believe the same situation applies for merchants with a UK Shopify Payments account in terms of HMRC, and it is down to the merchant to file and submit all relevant tax documentation to them directly.

Further advice I can offer on setting up a limited company is limited, so I would suggest reading through these third-party resources for more information on the process and what you should consider:

• Setting up a Limited Company: Five Key Considerations
• Considerations When Starting a Limited Company
• 10 things you should know before setting up a limited company

Please let me know if you have further questions.

Kind regards,

Victor | Shopify Social Care

[Virtuosoaccount]

Hi @tarung We help making the decision of setting up a limited company and to have a plan to submit the tax returns.

Please get in touch with us

[nssdw]

Hi Victor,

This is such an important thread. Thanks for maintaining it.

I am under the £85k threshold and should not be charging VAT, however, when I go to edit my United Kingdom Tax Settings, I am unable to edit the base tax rate. Please help.

[Victor]

Hi @nssdw,

Thank you for your kind words and I'm glad to hear that you've find this thread useful. From the page you've shown in your screenshot, you'll want to press the three dots over on the right and you should then see a "Remove" option:

Once this is done, customers in the UK should not be charged VAT when making a purchase on your store. Please try this and let me know if you experience any issues.

Kind regards,

Victor | Shopify Social Care

[WoodyBrighton]

Hi Victor,

Is there any update on fixing the coding error in Shopify for international sales?

When "my prices include VAT" is checked, the base export price should calculate = domestic price / (1 + dom VAT rate).  But Shopify maths is wrong and it continues to include the domestic tax when selling to an international customer.

We need this fixed ASAP!

thanks

Andrew

[Victor]

Hi @WoodyBrighton,

Thank you for getting in touch. If your prices are set to be tax-inclusive, customers placing an order from a region where you do not charge taxes will still pay the full listed price of the items in their order, albeit with a tax rate of 0% being shown during checkout and in their order confirmation. At this time, it is not possible to have your taxes included in the prices of the product and then have customers in non-taxable regions pay less for the order (without the use of an app such as Multi Country Pricing).

I know that the ability to do this within Shopify is a popular feature request and our development team have been made aware. I will be sure submit your feedback as part of this request.

Kind regards,

Victor | Shopify Social Care

[WoodyBrighton]

Victor - thanks. It is not a feature request, it's a maths error in Shopify.

It is a critical coding error which prevents Shopify users from selling to international customers.

Can you please escalate to the critical problem team, not some product request team. Shopify is not currently working!

thanks

Andrew

[Paul_M-77]

Could not agree more!!

"It is not a feature request, it's a maths error in Shopify.

Can you please escalate to the critical problem team, not some product request team"

[Victor]

Hi @WoodyBrighton,

As mentioned before, the listed price of an item will still be charged to all customers if you have prices are set to include taxes, regardless of whether or not they are set to pay taxes on the order or not. There are not pre-tax and post-tax price points when you have taxes included, only the singular listed price. I of course understand completely why this would be a desirable option, but the Shopify system does not currently allow for this.

If you are seeing customers who are not due to pay tax having a tax rate above 0% appear on their orders, irrespective of what the cost of the product or their order is, then that would be an error. Please let me know if this is the case.

Kind regards,

Victor | Shopify Social Care

[WoodyBrighton]

Hi Victor,

Thanks. Yes, I confirm 100% that it is an error.

Work with me through an example:

- A Shopify store in Australia will use the following settings: "My prices include taxes" is checked; Australian tax = 10%; and tax for most export destinations will be 0%, for example New Zealand for most stores will be set to 0%

- Please choose ANY Australian store running on Shopify (sure, Shopify is not doing very well in Australia, pick ANY one)

- Select an item and add to your cart

- Go to check out using an Australian address

- You will see price, for example, $100 and it will say "Includes Tax of $9.09" is included (being 10%)

- ie to work out the $9.09 Shopify has done the correct maths, that is Tax = Price - (Price / (1+tax rate))

- so far so good!

- now change your address to New Zealand

- You will see the text "Includes tax of 10% being $9.09" is removed, good

- But, you will also see that the price remains at $100, which is the error, bad

- The correct price should be Export Price = Price / (1+tax rate)

- Please repeat for 5 more Australian stores, you will see the same error every time (and understand why Shopify is not popular in Australia!)

This is not a feature request, the feature is very much there and it partly works.

- Shopify correctly calculates the tax for a domestic sale.

- For an export sale, Shopify does correctly remove the text about the tax being included.

- But it does not calculate the price correctly. It's just a math error in working out the export price.

Can you please escalate this error to the most senior person you can. Someone must have some pride in the product and be willing to fix this.

Really appreciate you taking a good look at this.

thanks

Andrew

[Paul_M-77]

Exactly this for all UK stores as well - with the slight difference that sales tax is 20% for most goods

But the logic of the maths (and the error) is identical and really frustrating...

[Victor]

Hi @WoodyBrighton,

I agree with you on the reasons why this would be beneficial, and can sympathize with your opinion on considering this an error rather than a feature request. However, the fact that the tax-inclusive price of a product is not reduced despite the customer being exempt from tax is the way our system works and our developers are aware, as it was built this way. This fact is referenced in our Help Documentation on tax-inclusive pricing:

If you set a customer to be tax exempt but you use tax-included pricing, then the customer will still be charged the full listed product price.

As I've mentioned before, I understand completely why this is disappointing to those who sell abroad and wish to charge their international customers less for their products, and I have consistently submitted feedback provided by yourself and others on this issue to try and raise awareness of the demand for this change. I hope on a personal level that this will be considered and will be sure to update this thread if and when a change is made, although at this time I do not have more information to share.

Kind regards,

Victor | Shopify Social Care

[WoodyBrighton]

Hi Victor,

OK, we are agreed there is a coding error in Shopify.

We also agree that this error is documented in the help docs.

We agree this Shopify coding error prevents people selling abroad, as overseas sales are incorrectly charged domestic VAT.

We agree that you've sent this feedback to wherever it goes, thanks for doing that.

It's now been 4 months. 

Can you kindly provide an indication of when this error may be fixed, if at all?

Is it true that Shopify has stopped development of the base Shopify platform? Is it true that legacy Shopify will be turned off and customers pushed to Plus? When is this planned?

thanks

Andrew

[Victor]

Hi @WoodyBrighton,

The issue you and others have referred to is a design in our tax system and I have confirmed with our taxes team that this is intended behaviour, not an unexpected error. I do of course appreciate why this is problematic for merchants operating in countries where prices are tax-inclusive who also wish to sell internationally, and have submitted numerous pieces of feedback to our development team as a result. As a member of our support team, I am able to communicate issues and requests I hear firsthand from merchants but my influence is limited. At this time, I do not have an update on when or if this change will be made, but if I learn of any developments I will be sure to post in this thread with information as it becomes available. 

Shopify does not intend to force non-Plus merchants onto our enterprise plan, and the platform available to merchants through our standard plans is not going to be made unavailable. Rather, the platform continues to evolve with new features and improvements over time. Shopify caters to both small and large businesses and there would be little sense in denying use of the platform to the many SMEs that use the platform to run their businesses. 

Kind regards,

Victor | Shopify Social Care

[thebluehound]

It is incredibly frustrating that my shop based in the NL will now also lose customers in the UK after Brexit since they will have to pay VAT (and Shopify can't work out a system that deducts VAT at check-out).  The same anger my US customers voice every time they have to pay VAT.  By viewing other threads, I see this issue has been brought up for several years.  I don't think your 'Tax Team' fully understands the cost to SMALL businesses.  I will also ask that this be escalated. All the apologies in the world won't help a struggling business during corona-times.

[Victor]

Hi @thebluehound,

Thank you for your candid feedback and I appreciate the frustrations that this issue can cause. Whilst I also understand that this is a long term feature request, I do know that our development team are aware of the requests we've had to make selling internationally easier for UK and EU-based merchants, and my colleague Cole from our product team provided a brief update on the situation here. As he mentioned, Shopify hopes to offer merchants greater control in terms of international prices and taxes in 2021, and this is something currently being looked into and worked on. I will be sure to stay personally updated with new features when they come and will communicate any changes here, as I know there is significant interest.

Kind regards,

Victor | Shopify Social Care

[thebluehound]

Thanks and while I can appreciate the thought, 2021 is a long ways off....especially after many years of requesting a simple change. I will guarantee that in 3 months, many of us will be out of business. These are COVID times. While you focus your attentions on US accommodations, you’ve almost always ignored you EU customers. You and your team can take pleasure in your lack of attention to your EU customers. Yes, if we were larger companies, we would certainly move to another way of selling. We thank Shopify for their continued non support over the years.

[steph68a]

Hi

I'm not sure how to go about this and Shopify doesn't seem to have the option. 

I am running my business in the UK and I am not VAT-registered (and do not need to be) yet there isn't the option on Shopify to not 'collect' VAT from United Kingdom?

By heading to Settings > Tax > United Kingdom > Edit it says I am 'collecting VAT in the United Kingdom' - of which I am not. It also tells me to input a VAT number, which I don't have because I am not registered. 

I've read through the little guide above and noticed it says to set Base Tax at 0% - which isn't the same as 'not collecting' but nevertheless I thought I would set my site to this, to save any impromptu mistakes. But it appears I don't have the option either. 

I have gone to the same menu as above and I do not have a section called Base Taxes under United Kingdom,  but I do for the Rest of the world profile.

What's going wrong or what am I doing wrong? 

This is confusing as it is, let alone adding Brexit to the mix. 

IGNORE THIS: 

I've just found the Remove function reading back through the comments - must have missed it the first time. Little disappointed this isn't shown on any of the main Shopify guides though. I've been searching for an hour for the solution via google, shopify and random forum posts! 

[Victor]

Hi @steph68a,

I'm glad to see that you were able to get this resolved but am sorry to hear that the answer was so difficult to find! I'll be sure to pass this feedback on. If there's anything else you need help with, please let me know.

Kind regards,

Victor | Shopify Social Care

[Victor]

Hey folks,

I am happy to be able to provide an update to you all today, as I have just learned that we have launched a new tax feature that allows merchants to include or exclude taxes based on the country the customer is based in. This means if you list prices as tax-inclusive on your store, with this feature you can allow customers in countries where you do not collect taxes to pay the tax-exclusive price. There is an example of how this feature works on our Help Center:

For example, Gabriel lives in a region with 10% tax, uses tax-inclusive pricing, and sells to several regions outside his own. He activates the Include or exclude tax based on your customer's country. He sells a product for $100.

- In his own region, the product costs $100. Using the formula Tax = (Tax Rate X Price) / (1 + Tax Rate), the product portion of the price is $90.91, and the tax portion of the price is $9.09.

- In regions where Gabriel is not required to charge tax, the product costs $90.91, the product portion of the price.

- In a region where Gabriel is required to charge tax at a 20% tax rate, the product costs $109.09. This price is calculated by applying the region's 20% tax rate to the product portion of the price.

This feature is currently in Beta, meaning it has only been rolled out to a limited number of merchants at this time. The rollout will continue in the coming weeks and I will seek to post updates when they come.

Kind regards,

Victor | Shopify Social Care

[thebluehound]

Thanks,,so how do we know if we can be part of the beta program? I’m missing the xmas selling season and my shop in the NL is shut due to lockdown

[Victor]

Hi @thebluehound,

Merchant cannot opt into the Beta rollout, and has currently only been made available to a limited percentage of merchants. Once the Beta period has concluded the feature should be made available to 100% of merchants. I will be sure to post an update here when that is the case.

Kind regards,

Victor | Shopify Social Care

[Oblotzky]

Thank you so much for that update! This seems to be exactly what I've been looking for ever since I opened my store. Glad it is finally being implemented!

[Teslyar]

Hi Victor,

Thank you for pushing this through, however, It doesn't actually work for the EU. (Disclosure: I have beta access)

It does not allow us to show the tax inclusive price on the product page which is against EU regulation.

For example, if my address is in Germany, my VAT rat is 16%. I am also VAT registered in Italy which has a rate of 22%.

Product A has an inclusive price of $100.

Scenario 1: A Germany customer will see $100 on the product page and at checkout ($86.21 rev + $13.8 tax). All good.

Scenario 2: A customer from Italy comes along and sees $100 on the product page, however when they get to checkout, they will see and have to pay $105.16 (($100/1.16)*1.22). This breaks EU protocol of not showing the price including all tax on the product page. The Italy customer can now report me to the EU Commission.

This is how it should work for this function to have the desired affect (using same example as above):

1: A customer from Germany will see a price of $100 and at checkout will see the same price ($86.21 rev + $13.8 tax). 

2. A customer from Italy sees a price of $100 on product page and when they get to checkout the price is $100. The product price is $100/1.22 = $82. The amount of tax payable to Italy is (($100/1.22)*0.22=$18). That way you show the tax inclusive price on the product page and at checkout. You have no issues with EU regulation and everyone is happy.

3. A tax exclusive country will pay $86.21 ($100/1.16) at checkout as the home's base tax rate does not apply.

You just need to make a slight modification to your current beta implementation formula. If you do so, you will comply with all EU regulation and all EU customers will finally be happy.

Please share the above calculations with your development team.

The alternative is if the product page price changes based on customer IP address. If this is done, your calculations are ok as the product page price will be the same as checkout.

I look forward to hearing from you. You can switch the above examples with the UK, or any EU country.

Kind regards,

Yuriy

[Victor]

Hi @Teslyar,

Thank you for your feedback and detailed breakdown of the issue. My understanding is that whilst this initial release allows customers to see the correct prices with the appropriate taxes at checkout, the issue you have raised is a known one and is something being worked on by our development team at this time. My colleague Cole also posted about international pricing in another thread:

We are working hard on adding other global selling capabilities in addition to the above, and you will see more things around managing international pricing and import duties / taxes in 2021 as well.

This is a topic I am personally paying close attention to, and I will continue to provide any updates here when I have them. I have also gone ahead and shared your comments with our development team as merchant feedback plays a large part on how we develop and build features for the platform. Thanks again for providing this information to me here.

Kind regards,

Victor | Shopify Social Care

[Stefano555]

Hi, according to the new UK rules, the VAT collect applies when you sell for a value less then 135£. In this case a 20% vat has to be shown in the cart and in the invoice. If, instead, you sell for more than 135£, the VAT must not be collected. So, I have activate the new Shopify UK VAT COLLECT system and to see if that works I made a simulation and put in our cart a product worth 165Euros which is more than 135£. I would so have expected the VAT to be zero (because according to the UK rules, no VAT has to be collected), but instead a 20% VAT was shown in the cart. Does that mean that Shopify UK VAT collect system does not apply the 135£ rule? Is that a mistake?

[RobS]

@Stefano555 I have been trying to raise this issue on another thread. Bear in mind that you will need to be registered for VAT in the UK and complete a UK VAT return to collect the tax and you'll have to decide whether the additional admin is worth it. If you aren't registered with the UK tax authorities then as far as I can work out you won't be able to accept orders under £135 (I'm not 100% sure if this £135 is including or excluding taxes, presumably excluding).

https://www.gov.uk/government/publications/changes-to-vat-treatment-of-overseas-goods-sold-to-custom...

For those of us in the UK the same will apply from July 2021 when selling into the EU.

As far as I can tell, Shopify are unaware of or are just ignoring this issue. I don't think the recent changes to the tax settings can handle the flexibility that is required.

[Stefano555]

Hi Robs. I am glad I am not the only one to have noticed this issue. It think it is very easy for Shopify to fix it. But if Shopify doesn't, there is no way for us, users,to fix it. That would mean that the checkouts and invoices of out-of-UK-onlineshops selling into UK will not be compliant with UK rules. Infact, at the moment, Shopify does not allow to apply UK VAT on sales lower than 135£ and to exempt VAT on sales greater than 135£ .

Regarding the UK VAT registration required for sales into UK lower than 135£, I still do not understand if the yearly 70000£ distance-selling thresholds applies or not. If it does, there is no need to have a UK VAT number below an yearly turnover of 70000£ online sales. If it does not apply, then that would mean that if, to make an example, your annual average sales are only 100£, then you have to register for a UK VAT and transfer 20% of your 100£ sales to the UK tax office. Which is quite crazy!!!

[RobS]

Hi @Stefano555, as far as I can work out you would need to register in the UK for VAT as soon as you take a sale that requires VAT to be collected - I don't think the 12 month sales threshold that UK businesses have applies. I know it sounds crazy!  Check with your accountant though as I am a mere business owner and not a tax advisor 🙂

What we think we will do, once the Brexit situation becomes clearer (if it ever does!!) and hopefully the COVID border problems sorted, is sell to our EU customers using the Duties and Taxes Paid services offered by our shipping company. It's going to cost a load more to ship to Europe but that way our customers will pay everything up front to us, we don't need to worry about ex-VAT prices on the website or the 150 euros / 135GBP limit....we just need to build in the extra costs we will incurr into our shipping rates. It won't be economical for EU customers to place small orders with us anymore as the shipping we will be charging will be a lot, but the mix of products we sell has quite a lot of high-value items and the impact of higher shipping costs on these should be less noticeable. Each store is going to have to look at their own product mix, average sale value and market to decide what way is going to work. DTP might make no sense for some stores.

[thebluehound]

So my confusion continues.  I'm based in the NL and sell primarily to EU countries.  With the new tax option, my checkout still shows a dutch 21% BTW/VAT collected as a component of the check-out product price (individual webshop products are priced tax inclusive and only at check out is the tax shown as a component of the price).  I am a small company, so do no more that €35,000 in any EU country, therefore, I thought that I collect all of the VAT and submit to the Dutch gov't regardless of which EU country my customer is based.  Is this not right?

As for the conversations about various tax rates within the EU (selling EU to EU) not showing correctly, is this in reference to larger companies that sell more than €35,000 per country?  This is one thing I'm not really understanding.

Selling outside at the EU (excluding the UK), with the new tax option, the price shows reduced only at check-out but with a note saying the price has changed to not include tax.  Is this allowed for an EU based company?  Can prices 'just be different' at the end without showing a line that reflects the VAT being deducted?

The UK, what can I say.  I will sadly just had to block sales to the UK.  For a small company, its way to complicated for me to deal with.

Thanks, Joe

[Stefano555]

Hi

yes, for the first issue, you are doing correctly. Regarding distance-sales (whether online or not) EU countries have agreed that under certain annual sales thresholds (each country has its own threshold) a EU company of the country X selling to a non-VAT customer in a EU country Y is allowed to charge on the invoice the VAT of the country X. If, on the other hand, the total annual sales in the country Y are above the country Y threshold, then, exclusively for the sales above the threshold, the company  in the country X has to register for VAT in the country Y, has to invoice the VAT% of the country Y and has to transfer the VAT collected in the country Y to the tax authorities of the country Y.

Regarding selling out of EU, either a company sells to a vat-customer or to a non-vat customer, VAT does not apply : no VAT value has to be invoiced. So it is up to you if to adjust consequently your online selling price or not.

Regarding UK, it is a mess. For sales above 135£, UK says that the local tax authorities will claim to the local UK non-vat customer the custom duties and the VAT. How they will do this, I think nobody knows. Imagine the amount of work that is!

For sales under 135£, UK wants any non-UK company to collect the VAT  directly from the UK customers. This is why they ask for UK VAT registration. So the non-UK company selling into UK will have to collect the VAT from the final customer and then transfer the VAT amounts to the UK tax authorities. If you are a small company that is a big constraint.

[Paul_M-77]

Yuriy is my new hero

[Paul_M-77]

Hi - are any other UK stores frustrated by this?

My overseas customers are constantly pinging me asking why they are being overcharged (since their price doesn't drop when the tax is removed)

It would be an even bigger problem in the UK to show prices ex-VAT to consumers, so please don't offer that as a feasible solution.

It is a severe restriction on our overseas growth at the moment - as it's impossible for me to show competitive prices

Does anyone have a meangingful work-around?

Thanks

Paul

[Victor]

Hi @Paul_M-77,

This is something we've heard from merchants in tax-inclusive countries before, including the UK. It's not an ideal situation but this is something our development team is aware of and considering. I have submitted your feedback to them and if any changes to this system are made I will be sure to update this thread.

I understand that it would be problematic to show pre-VAT prices on your store when selling to UK customers without also showing the VAT-inclusive price; one option you have would be to perform a theme customization, shown here, which would display both the tax-exclusive and tax-inclusive prices on the product page. Another option would be to use an app such as Multi Country Pricing to reduce the prices of your products for customers in countries and regions where you do not need to charge VAT, whilst keeping your prices as VAT-inclusive for your customers in the UK.

Kind regards,

Victor | Shopify Social Care

[Victor]

The UK government has set up a hotline for businesses concerned about paying their taxes due to the coronavirus pandemic. The number in question is 0800 0159 559 and more information can be found here.

In summary:

HMRC has a set up a phone helpline to support businesses and self-employed people concerned about not being able to pay their tax due to coronavirus (COVID-19).

The helpline allows any business or self-employed individual who is concerned about paying their tax due to coronavirus to get practical help and advice. Up to 2,000 experienced call handlers are available to support businesses and individuals when needed.

I will attempt to update this thread with any tax-related information as the situation progresses.

Victor | Shopify Social Care

[richardg64]

My store is based in the UK. I just started a trial account using shopify.com rather than shopify.co.uk.

Should I switch to a shopify.co.uk site?

[Victor]

Hey @richardg64,

Thank you for reaching out, and welcome to Shopify! There's no difference between stores or accounts when signing up through shopify.com or shopify.co.uk, so there's no need to close your store and restart one via the .co.uk site.

Kind regards,

Victor | Shopify Social Care

[FazalKhan98]

Hello! I am just started my shopify store in the UK and I plan on selling a few things but before I get started I was wondering if you could help me with some queries.

1) I am a student with no knowledge on taxes etc. When do I charge VAT? And if I am selling to people in the UK as well as the US should I change any tax settings etc? 

2) When am I supposed to pay taxes and how should I pay them?

Thank you!

[Victor]

Hi @FazalKhan98,

Thank you for reaching out with your questions, and I'm glad to hear that you're considering these questions when getting started. Taxes can be confusing, and the information I can provide is limited, but I'll offer the advice I can below.

Your primary source of information should come from the UK government's website, and I have included a number of links from them in the first post in this thread. This page specifically explains some of the key details when it comes to charging VAT, and what your responsibilities as a business owner are when it comes to collecting and paying VAT when selling in the UK. There are certain thresholds that, once met, your business must be registered with HM Revenue & Customs in order to pay VAT—at the time of writing, this is when your business' VAT taxable turnover is more than £85,000.

You will also want to consider how you want to set up your business, such as as a sole trader or a private limited company, which will also impact what your tax obligations are. Generally, most merchants who are starting a business in the UK will do so as a sole trader, as this is usually an easier process and comes with less associated costs and regulations. More can be read on this here.

I would recommend when starting out it is best to focus on one market to begin with, and make sure you have everything set up correctly there first, but if you do wish to expand and sell into the USA and other countries, that can be done too. It is unlikely that if you are based in the UK and have no physical presence in the USA (e.g. a warehouse, office etc), you would be required to charge your customers sales tax on orders, although your customers would be subject to import duties. I would suggest taking a read through this blog I came across which offers advice on this topic.

Please bear in mind that Shopify cannot offer direct tax advice to merchants, and can only really help with helping you configure your tax settings in the backend of the store. If you are just starting out, however, and therefore likely do not need to register for VAT at this point, then you likely will not need to charge your customers VAT for orders on your Shopify store. Here is another blog that covers this topic.

Ultimately, it is your responsibility to determine what your tax responsibilities are and what that means for your business and customers, so I'd highly recommend doing your own research on this topic prior to launching the store. There are a host of online resources on this topic, both from the UK government and third-party websites and blogs, so you should find the information you need. The links I've provided here and in my initial post should give you a good start. If you are still unsure, you could also consider hiring a tax professional to ensure you are doing everything correctly.

Kind regards,

Victor | Shopify Social Care

[BowieFan]

Hi . I have set up a Shopify shop in the UK. Initially my products were just children's clothes which are 0% VAT. Also I don't turnover enough to be VAT registered so I wasn't concerned about this.

I now am adding some items that VAT is charged on. Do I tick or untick the box that says "Charge Tax on this Product" ? Not sure what I am meant to do here now.

Thanks 

[Victor]

Hi @BowieFan,

Thank you for getting in touch with your question. If you are not required to charge any VAT on the products sold on your store, then you can set the UK tax rate to 0% in Settings > Taxes. However, if you are required to charge taxes on some products but not others, you can set the UK tax rate to the correct amount (20%) and then use the "Charge taxes on this product" option to enable taxes for some products but not others.

However, if you still don't meet HMRC's minimum turnover threshold to register for VAT, you likely won't need to charge taxes on any of your products. You may wish to consult with a tax professional if you are unsure of your obligations.

Kind regards,

Victor | Shopify Social Care

[JKD19]

I'm also non-VAT registered and cannot set to 0% in the setting, can you help please as saying 'Not collecting'

[thebluehound]

Please read Victors (moderator from the other thread) response. It’s in beta and will only be accessible to the ‘invited’ shops....for now

[JKD19]

'Invited' and in Beta - the new laws will change as from 1 Jan 21.  Why is Shopify taking time?

[Stefano555]

It's quite confusing. I am reading over the Internet. I cannot understand if the distance-selling threshold of 70000 pounds turnover which currently applies will continue to apply or not after 01.01.2021. If it does, if your yearly online sales turnover into UK is less than 70000 pounds, then there is no need to apply for a UK VAT number. But, in such a case, what about the invoice? Should VAT amount be in the invoice or not. ?And does the 135 pounds threshold applies or not ? Very confusing!!!

[ColinR]

Hi Victor,

In your second screen shot you show what the inclusive tax amount is - I only see what shows in my store as the third screen (amount, sub total, and total are al the same). What should I be looking at to get the tax amount showing. Is this driven by the theme?

[Victor]

Hi @ColinR,

Thank you for reaching out. It's possible that this could be due to the theme you're using, as the theme ultimately determines how data from the backend of Shopify is presented on your storefront. Do you definitely have prices set to be tax-inclusive? And when you test this, are you entering in an address from a region where taxes are due to be charged?

If you'd also be happy to share you store's URL here, I can take a closer look for you.

Kind regards,

Victor | Shopify Social Care

[ColinR]

Thanks @Victor 

Theme is Brooklyn and URL is masatojones.myshopify.com

We're on the cusp of having to charge VAT so I'm not sure at what point we should be seeing this. At the moment we're not showing a tax inclusive message but before we turned it off it wasn't showing as per your example hence my question.

Best Wishes,

Colin R.

[Victor]

Hi @ColinR,

Thank you for sharing your store here. I did add a product to the cart on your store and proceeded to checkout, and indeed there was no mention of taxes as part of the order here. This is likely because you do not have some settings enabled which allow for taxes to be charged, and/ or displayed at checkout.

As your store is a UK-based business, you'll presumably want to have taxes included within the price of the product—if so, you'll want to have this option enabled in Settings > Taxes:

This means when taxes are due to be charged to the customer, the price you've listed for the product(s) in the admin will be deemed tax-inclusive and the customer will be shown how much of their order is VAT.

You'll also want to ensure that your products are taxable, otherwise the customers will not be shown any tax information at checkout. You can check whether taxes are due to be charged for a product by heading to the Products section of the admin and clicking on the product in question. If you have numerous variants for a product, the "charge taxes" option will be viewable within the variant editor:

You can also enable taxes to be charged for numerous products and variants at once via the bulk editor.

To clarify, if you enable this option on products and variants, this does not mean taxes will always be charged at checkout—it just means the system will include the tax amount if the customer is eligible to pay VAT. As an example, if you have a £5 product and you are required to collect VAT from UK customers but not those from the USA, whilst customers from both countries would pay £5, only the customer from the UK would see that VAT is being charged as part of their order.

I hope this clarifies things but please let me know if you've further questions on this.

Kind regards,

Victor | Shopify Social Care

[Dunne-08]

Hi. Our store is facing VAT fees when delivered to our international and UK customers and we have discovered that this is happening to our products and not happening from products bought and delivered from other similar stores. Our store is based in the US and so are other similar stores. The example I will give is clearer if I tell you from my personal experience as a customer.

I live in Ireland and work for a US clothing merchandise store. I had the store send me a t-shirt (from US to Ireland) to the value of $35 and I had to pay a VAT fee @23% on arrival to collect the hoodie.

Around the same time I ordered a t-shirt, vinyl & CD from a different merchandise store where it was almost double the cost $68 but I did not have to pay any VAT on arrival, despite it costing more. I order from them frequently and never paid VAT fees.

So as you can see VAT charges occur from our merchandise but not from the other merchandise store even though we are in the exact same business and both ship using USPS. I cannot find out why this is happening, only that maybe VAT fees are calculated and included in shipping costs of other stores and we have not set that up.

Our customers from various countries have told us that they also had to pay fees on our products so it's not an exclusive problem to me in Ireland.

Do you have any idea what's going on? Any insight would be greatly appreciated.

[colinsweetman]

@Dunne-08 

If your online purchase costs more than €22 you will have to pay VAT. If your online purchase costs more than €150 you will have to pay VAT and customs duty. This will be collected by the company that delivers your parcel. The company usually have an administration charge. Methods of delivery and collection differ from company to company, so you should contact them directly for more information.

[Dunne-08]

Yes that is correct, my issue is that our products are liable for VAT when over 22 but there are no VAT charges from products bought from others stores over 22. Do we need to register for VAT, are we not supplying the right paperwork?

[FitzgeraldLobe]

Hi,

I’ve seen some videos and read posts about that topic. Will this be made more automatic or easier to manage in later updates?

Especially here in Europe every country, EU and non- EU member, has its own VATs as you know. 

Would be great if the system could automatically display the gross price or netto price/ tax free based on the customers country. 
We have in Austria regularly a VAT of 20%, and the reduced VAT is 10% for food, beverages, books & magazines, rents, public transport. 

So if a customer from Switzerland (non- EU member) orders 4 candles (20%) and 1 book (10%), I want my shop to display the correct prices for my customers country.  

Any chance this will happen? I know that would be a nightmare for every programmer...

thanks, Manfred

[pb_ms]

We are setting up a grocery shop on Shopify and we need to charge VAT as per the following:

1. Exempt = the product is not taxable
2. Zero rated = 0%
3. Reduced Rate = 5%
4. Standard Rate = 20% on other items

This depends on the type of product that are sold. Is there a way to create different tax classes and assign products to them? We need to display prices inclusive of VAT and ensure correct taxes are charged at checkout.  

[colinsweetman]

Hi 

Yes  this feature is built into Shopify. You need to code the products to reflect their correct VAT treatment. 

Also- I assume you are only selling locally?

[pb_ms]

Can you please provide some details as I couldnt find any. 

We are initially selling within UK only. 

[Victor]

Hi all,

Apologies for the delay in my response here—there was an issue with our notifications system for this thread, and I was not aware of your posts here until I checked it today. I'll quote and respond to a number of your posts here.

@Dunne-08:

Hi. Our store is facing VAT fees when delivered to our international and UK customers and we have discovered that this is happening to our products and not happening from products bought and delivered from other similar stores. Our store is based in the US and so are other similar stores. The example I will give is clearer if I tell you from my personal experience as a customer.

I live in Ireland and work for a US clothing merchandise store. I had the store send me a t-shirt (from US to Ireland) to the value of $35 and I had to pay a VAT fee @23% on arrival to collect the hoodie.Around the same time I ordered a t-shirt, vinyl & CD from a different merchandise store where it was almost double the cost $68 but I did not have to pay any VAT on arrival, despite it costing more. I order from them frequently and never paid VAT fees.

So as you can see VAT charges occur from our merchandise but not from the other merchandise store even though we are in the exact same business and both ship using USPS. I cannot find out why this is happening, only that maybe VAT fees are calculated and included in shipping costs of other stores and we have not set that up.

Our customers from various countries have told us that they also had to pay fees on our products so it's not an exclusive problem to me in Ireland.

Do you have any idea what's going on? Any insight would be greatly appreciated.

Thank you for detailing your issue here. When you say your store is facing VAT fees when you export your products from the USA to Europe, can you clarify what is happening exactly? Are you receiving a notice to pay VAT directly, or is it a case that your customers are seemingly being charged VAT, either when they checkout or receive the products? Is your business solely based in the US, or do you have any presence in Europe? You mentioned you work for a US company but are based in Ireland—does the business have numerous employees based in Europe, and/ or physical presences such as warehouses or offices? 

From the sounds of it, the issue you're experiencing is something external of Shopify and may require consultation with a tax professional to resolve. However, if you can answer my questions above, I'll see if I can help at all.

---

@FitzgeraldLobe:

Hi,

I’ve seen some videos and read posts about that topic. Will this be made more automatic or easier to manage in later updates?

Especially here in Europe every country, EU and non- EU member, has its own VATs as you know.Would be great if the system could automatically display the gross price or netto price/ tax free based on the customers country.

We have in Austria regularly a VAT of 20%, and the reduced VAT is 10% for food, beverages, books & magazines, rents, public transport.

So if a customer from Switzerland (non- EU member) orders 4 candles (20%) and 1 book (10%), I want my shop to display the correct prices for my customers country.

Any chance this will happen? I know that would be a nightmare for every programmer...

thanks, Manfred

The way pricing and taxes work within Shopify means that the tax-inclusive price will display and be charged to customers, irrespective of whether they are due to pay VAT or not. If they are due to pay VAT they will see the correct tax amount charged as part of the cost, whereas customers not required to pay VAT will still see the same price but their tax rate will be set at 0%. This is how the process works if you have taxes included in the price of your products.

However, you can charge both tax-inclusive and tax-exclusive prices if you change your Shopify settings so that the prices shown on the storefront do not include VAT, and then it is added on at checkout if a customer is required to pay. If you are required to show the tax-inclusive prices on your storefront, you can make some edits to your theme to have both prices display. This process is detailed in further detail in my opening post for this thread.

---

@pb_ms:

We are setting up a grocery shop on Shopify and we need to charge VAT as per the following:

1. Exempt = the product is not taxable
2. Zero rated = 0%
3. Reduced Rate = 5%
4. Standard Rate = 20% on other items

This depends on the type of product that are sold. Is there a way to create different tax classes and assign products to them? We need to display prices inclusive of VAT and ensure correct taxes are charged at checkout.

 I believe this should be possible using our tax override feature. You'll be able to create collections specifically for this purpose, and then create a tax override to apply a specific tax rate to products you've added to the collection. I'd recommend checking out our guide on this over on our Help Center.

Kind regards,

Victor | Shopify Social Care

[FrancisByng]

Hi Victor

We are a store charging UK VAT at various rates like @pb_ms: We are on Shopify Plan

We have set up Tax Rate Override collections which work OK but nowhere can I find how to get a report breaking down the sales in each tax category. The Tax Report lumps all taxes together as one total but I need to report the various tax rates separately to our tax authorities.

What am I missing?

FB

[Victor]

Hi @FrancisByng,

Thank you for reaching out today. Unfortunately, I do not believe there is a detailed tax report within the Analytics section of the Shopify admin that shows you orders with a breakdown of which tax rate has been applied. Do your tax overrides apply to specific products and collections, or specific customers too? If they just apply to products/ collections, it may be possible to manipulate the main sales report to show only the products that apply to each override you've set up. If you can tell me a bit more about your overrides and what they apply to, I can perhaps offer a more workable solution.

Outside of the internal reports available in the Shopify admin, you could also consider a third-party reporting app available on the Shopify App Store. These apps offer more detailed analytics and most offer free trials, meaning you can install them and test them out to see if they offer the data you're looking for here.

Kind regards,

Victor | Shopify Social Care

[FrancisByng]

Thanks for your reply, Victor

The additional tax rate categories have been set up as Collections. I have looked at manipulating the sales report but I cannot see any option to filter by Collection (which would capture the data for my tax categories) so I am stumped

I have also looked at some of the apps in the Shopify App Store but I have not been able to find anything suitable

Is there any way to download the detail of each transaction and then manipulate in Excel? I could then extract and total all order lines those with the relevant VAT charge

FB

[Victor]

Hi @FrancisByng,

Okay, thank you for those additional details. One thing you can do is export orders from the Orders section of the admin, which will provide you with a .CSV file which can then be opened and worked with in spreadsheet programs like Excel. There is a column in this file called "Tax 1 Value" which will detail what tax rate was applied to the order in question. You can then filter the orders via this column if you wish to only look at orders that included a specific tax rate.

Please give this a try and let me know if this method helps at all.

Kind regards,

Victor | Shopify Social Care

[FrancisByng]

Thanks again for your help

Unfortunately I don't think this solves the problem. Shopify lumps all taxes together into one total for each order (not each line). So if there are multiple items in the order, at different tax rates, then it is impossible to extract the individual tax rates and amounts without manually analysing each order.

Of course I could Tag every product which has non-standard tax, and there is a field in the order transaction data titled "Tags" (Column BE in Excel) but Shopify does not seem to write any data in here.......... perplexing.

FB

[pb_ms]

One way to generate correct tax calculations is to have tax override for specific collections. You can then add products to such collections and keep those hidden.

Frankly, this is a very daft solution from Shopify.  Ideally, it should support all the various tax classes, but instead it just bundles in a single tax rate. The problem with the above approach is reconcilliation with accounting systems, as the order export will not match the tax rates. Unless you manually do this line by line. For us being a B2B wholesaler, its unnecessary manual work.

Just counting days to get off shopify and have a better platform. 

[FrancisByng]

@pb-ms

I saw Victor's advice to you about the "Collections" work-around but it doesn't help much as I cannot report the Revenue and Taxes from selected Collections.

Is it cheeky to ask you which package you hope to move to? 

FB

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