UK VAT Suddenly No Longer Being Charged

Accounting & Taxes
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Topic summary

A UK-based store discovered that VAT was being incorrectly removed from orders at checkout, despite products displaying VAT-inclusive prices and customers being located in the UK.

Issue identified:

  • Shopify Tax service was calculating VAT based on product categories
  • The system incorrectly classified certain items (e.g., greeting cards) as zero-rated when they should be standard-rated
  • This resulted in inconsistent VAT application across orders

Solution:
Switching from Shopify Tax to Basic Tax resolved the problem.

The user shared this information to help others experiencing similar VAT calculation issues, noting it took several hours to diagnose the root cause.

Summarized with AI on November 2. AI used: claude-sonnet-4-5-20250929.
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We have today noticed orders coming through without any VAT on them or being charged. If I go to our store, the products are listed full price inc VAT, but once I go to checkout and try to pay the system updates the product prices removing the VAT from the order. Despite the fact the country for the order is set to UK.

We have had some orders today VAT has been changed, most most haven’t.

We have worked out the problem is Shopify Tax! If you use the Shopify Tax service it calculates the VAT based on the product category. Their VAT rates are incorrect and see some products (Greeting Cards) as zero rated.

We got around this by switching to Basic Tax.

Just putting this here for anyone else having a similar nightmare. Took us several hours to work this out!

Thanks

Mat