Regional Support: Taxes (UK)

Victor
Shopify Staff
1160 104 261

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:

 

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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 97 (97)
CPRE
New Member
1 0 0

Hi, 

I'm trying to set up a store for the charity I work at in the UK. We want to test print on demand merchandise. 

 

If the the customer and our store/charity are based in England, but some of the products are produced in Europe, will additional ta be required about the 20% VAT? 

 

Thanks 

Victor
Shopify Staff
1160 104 261

Hi @CPRE,

Thanks for getting in touch. Am I right in thinking that even though your products are produced in the EU, you're only selling to customers in the UK? Or are you selling to European-based customers too? I believe if it's the former, and you're only shipping your items to British customers, you'll only be liable to charge the 20% VAT rate irrespective of where your goods are sourced from. Please also be aware that you're only required to register for VAT and charge it to your customers if your business meets the thresholds set by HMRC. 

Kind regards,

Victor | Shopify Social Care

Victor | Social Care @ Shopify 
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SafeHands36
Tourist
10 0 2
Hi Victor

Thank you for your email. We are a UK company selling exclusively in the UK, we are VAT registered, However, many of the items we sell are items which have medical prescriptions so we do not need to apply VAT to these items, but we do need to apply VAT to the delivery charge.

Many thanks

Victor
Shopify Staff
1160 104 261

Hi @SafeHands36,

Okay, I see. I checked in with a colleague of mine in our taxes team, and they did urge you to confirm that you still need to charge shipping taxes based on non-taxable items, as this generally is not required and the Shopify tax system works on this basis. However, they did say that if you are confident you do need to charge shipping taxes when non-taxable items are in the cart, there is a workaround you can try. If you set the items as taxable, but then apply a tax override on the items and set the tax rate for those products to 0%, the system will then see the items as taxable and charge shipping taxes as a result, but the rate of tax on those products will be 0% as per the override.

Kind regards,

Victor | Shopify Social Care

Victor | Social Care @ Shopify 
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Vintage84
New Member
1 0 0

Hi, my website sell used clothing (630900), we sell way less than 85000 Pounds per year in UK, we have to charge the sale tax when we sell something in UK ?

Thanks.

RobS
Shopify Partner
20 0 7

@SafeHands36 In general the VAT rate applied to shipping is based on the VAT rate on the goods supplied. So goods charged at 20% VAT will have 20% shipping, zero-rated goods have 0% VAT on shipping. This is how our store handles it and this is what shopify does by default (it didnt for a long time though!).

There are some exceptions around this I believe (supplying goods for customer approval?). Have you checked out the HMRC guidance?

https://www.gov.uk/guidance/vat-on-postage-delivery-and-direct-marketing-notice-70024#delivered-good...

Disclaimer - I am not an accountant or tax specialist so if it is not clear from the guidance you should check with your accountant for a definitive answer based on exactly how you are trading

 

 

SafeHands36
Tourist
10 0 2

This work round is great thanks, and it works. 

However, I have double checked on the rules and your colleague is right.  If the item(s) in the cart is tax exempt the delivery charge becomes tax exempt too.   As soon as a Taxable product is added, tax needs to get added to the delivery charge.   Shopify does this, so no work around required!   Thanks for all your help with this.  Problem solved!

 

SafeHands36
Tourist
10 0 2

Thank you  - I did double checked on the rules and you're correct.

 

Victor
Shopify Staff
1160 104 261

Hi @SafeHands36,

I'm glad to hear that the workaround worked, even if it isn't needed! I know taxes can be a headache to figure out, but it sounds like you were able to verify that the tax system works as is in this instance. Please get back in touch if you have any further queries.

Kind regards,

Victor | Shopify Social Care

Victor | Social Care @ Shopify 
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Victor
Shopify Staff
1160 104 261

Hi @Vintage84,

Thanks for reaching out. As per the UK government's website, merchants in the UK are required to register for VAT when they meet certain sales thresholds:

You must register for VAT if:

  • you expect your VAT taxable turnover to be more than £85,000 in the next 30-day period
  • your business had a VAT taxable turnover of more than £85,000 over the last 12 months

You might also need to register in some other cases, depending on the kinds of goods or services you sell and where you sell them.

I would recommend referring to HMRC's guidance on VAT registration, and to consult a tax professional if you are unsure of your obligations.

Kind regards,

Victor | Shopify Social Care

 

 

Victor | Social Care @ Shopify 
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