Shopify is not calculating the VAT on products and shipping correctly.

[Rillix]

Hi everyone,

We are having some issues with Shopify in the UK calculating VAT incorrectly. I have attached the order below. We are VAT registered in the UK, this order is for a customer in the UK. The hand tools and postage include VAT, the kids gloves are zero-rated (the product is flagged to not charge tax).

The hand tools are £79.80 and include £13.30 VAT
The postage is £4.95 and includes £0.82 VAT

Total VAT should be £14.12, yet the order is showing £13.91.

It looks like Shopify is not using 20% to work out its VAT. Has anyone else experienced this, or know if we are doing something wrong?

Many thanks

[stevem1981]

Hi

The shipping tax is worked out spread across all of the Vattable / non vattable items

You have sub total of 79.80 (Vattable)

Subtotal of 108.30 (all items)

79.80 / 108.30 gives you the % of the vat worked out on the shipping of 4.95 (73.68%) Take the 20% calculation of the 4.95 which rounded would be 0.83

Now multiply the 0.7368 by 0.83 and you get 0.61.

Subtotal: £108.30
Shipping £.495
Taxes: Vat Items (£13.30) + portioned Vat of Shipping (0.61p)

Total: £113.25

Hope that helps

[Rostislav]

HI Rilix

You are probably on Shopify plus 

Technically,  Shopify weights the shipping to the items and depending on whether the item bears VAT or not it applies VAT to the weighted proportion of shipping which is due to that item. Shopify does not do it correctly since this calculation should be done based on net of VAT price of products (Shopify applies the calculation to VAT inclusive prices) . The result is that VAT is not applied to the proportion of shipping attributed to the nontaxable item

  Here is  how it is done : 

As I pointed above Shopify is using VAT inclusive prices for this calculation which is not correct. 

Proper calculation would have been like this 

The difference is  marginal , but it may create a problem in the accounting. 

[Lisajlb]

This is a stupid way for it to work. In my case we sell VAT and non VAT related items, if the customer buys all none it doesnt inc VAT on the shipping, if they buy with VAT it does and if they buy half and hlaf it calculates it as above. The issue for me is due to this stupid mehtid councils will not pay their bill as it is not 100% accurate. causing me to lose money buy debt cashing with councils who cannot accomodate for this. Surely it should be programmed to be literal.