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.

[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

[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?

[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

--

[Victor]

Hi @FrancisByng,

I don't believe this is the perfect solution, but when you export orders via CSV, the file will include a breakdown of each tax rate that was included in the order, rather than lumping them together. I tested this on my own staff store just now and can show you an example.

I bought two products from my store—bananas, which are not included in any override and therefore come with the default tax charge at 20% VAT, and some apples, which I applied a tax override for of 10%. You can see the two differing tax rates applied to each product here in the order:

I then exported the order to CSV, and in the file both tax rates and the amount charged for each appeared here:

Granted, this data does not show you which products were charged at which tax rate, but it does show you for each order how much money was charged at each tax rate, so you could use this data to total up how much was charged at differing tax rates for numerous orders.

I hope this is of some use to you. Please let me know if you've further questions.

Kind regards,

Victor | Shopify Social Care

[pb_ms]

Its still is very inefficient. I want to automatically export the order to Xero and ensure correct VAT classification is done to automate digital filling. None of the add-ons support this. Our B2B customers have also pushed back to this incorrect way to calculating taxes.

Shopify - you got to be serious about this. You are not making things easy for a UK business. 

[Victor]

Hi @pb_ms,

Thank you for providing your feedback here. I completely sympathize with this and understand why not having this data more readily available is a problem for you and your business. I will be submitting your comments to our development team for their consideration and will be sure to emphasize why this issue is problematic. 

Kind regards,

Victor | Shopify Social Care

[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