Regional Support: Taxes (UK)

Victor
Shopify Staff
Shopify Staff
1441 138 324

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:

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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:

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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:

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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:

 

image1.png

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: 

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

Victor | Social Care @ Shopify 
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Replies 112 (112)
WoodyBrighton
Excursionist
20 0 8

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

 

PMckay777
Tourist
6 0 6

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
Shopify Staff
Shopify Staff
1441 138 324

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

Victor | Social Care @ Shopify 
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WoodyBrighton
Excursionist
20 0 8

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

 

 

PMckay777
Tourist
6 0 6

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...

TC6
New Member
1 0 0

 

 

Victor
Shopify Staff
Shopify Staff
1441 138 324

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

Victor | Social Care @ Shopify 
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BowieFan
New Member
2 0 0

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
Shopify Staff
Shopify Staff
1441 138 324

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

Victor | Social Care @ Shopify 
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WoodyBrighton
Excursionist
20 0 8

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
Shopify Staff
Shopify Staff
1441 138 324

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

Victor | Social Care @ Shopify 
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thebluehound
Explorer
44 0 9

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
Shopify Staff
Shopify Staff
1441 138 324

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

 

Victor | Social Care @ Shopify 
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thebluehound
Explorer
44 0 9
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
New Member
2 0 0

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
Shopify Staff
Shopify Staff
1441 138 324

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 | Social Care @ Shopify 
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Victor
Shopify Staff
Shopify Staff
1441 138 324

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

 

Victor | Social Care @ Shopify 
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thebluehound
Explorer
44 0 9
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
Shopify Staff
Shopify Staff
1441 138 324

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

Victor | Social Care @ Shopify 
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Oblotzky
Tourist
9 0 5

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!