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I hope someone here can shed some light on the VAT rate I have to charge on shipping costs.
I am located in Ireland and ship foods ordered online on my website within Ireland and to the UK by the Irish Mail (An Post). Most of the foods are zero rated but some (like chocolate) are rated at 21% VAT.
It's very difficult to calculate the exact postage for orders so the amount charged for shipping is not the exact amount paid when posting the packet. The question is, whether I have to charge 21% VAT on my shipping costs or if I have to charge VAT on the shipping cost on the highest VAT rate of products in the packets. Here some examples which should be correct, if I understood the rules correctly:
10 casserole mixes (zero rated) -> shipping zero rated
10 chocolate bars (21%) -> shipping + 21% VAT
10 casserole mixes (zero rated) + 10 chocolate bars (21%) -> shipping + 21% VAT
10 rusks (13.5%) + 10 chocolate bars (21%) -> shipping + 21% VAT
It seems that it all depends on whether the shipping is a seperate service or part of the contract. This is what I found regarding distance sales on revenue.ie:
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Value-Added Tax
Distance Sales in EU
What are distance sales?
Distance selling in the EU occurs when a supplier in one EU Member State sells goods to a person in another Member State who is not registered for VAT and the supplier is responsible for the delivery of the goods. It includes mail order sales, phone or tele-sales or physical goods ordered over the internet.
Distance Sales in EU
What are distance sales?
Distance selling in the EU occurs when a supplier in one EU Member State sells goods to a person in another Member State who is not registered for VAT and the supplier is responsible for the delivery of the goods. It includes mail order sales, phone or tele-sales or physical goods ordered over the internet.
This is what I found on revenue.ie in the VAT guide:
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[img]http://www.revenue.ie/images/bl.gif[/img] [img]http://www.revenue.ie/images/bl.gif[/img]
Postage and insurance - reimbursement
5.7 Where amounts are charged separately for postage and insurance and paid over in their entirety to An Post or to the insurer on behalf of customers, suppliers may treat such charges as not being subject to VAT. If, for example, a trader charges an extra €1 for posting an order and such amount of postage is actually paid over, the €1 may be treated as exempt. Similarly, if a car hire company charges €50 for motor insurance, and that amount is actually paid over in full to insurers in the name of the lessee, the €50 may be treated as exempt. However, if a charge is made for posting and/or insurance, and a lesser amount is paid over by the supplier to An Post or to the relevant insurance company, the charge made to the customer is regarded as part of the total price of the goods/service supplied, and is subject to the VAT rate applicable to the goods/service in question.
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Treatment of mixed transactions - (package rule)
5.8 If an article comprising goods taxable at different rates is sold as a unit for a single consideration, (for example, a story book and accompanying cassette) VAT is payable on the entire amount charged at the rate applicable to the higher VAT rated item. The same principle applies to services liable at different rates or to a mixture of goods and services.
Postage and insurance - reimbursement
5.7 Where amounts are charged separately for postage and insurance and paid over in their entirety to An Post or to the insurer on behalf of customers, suppliers may treat such charges as not being subject to VAT. If, for example, a trader charges an extra €1 for posting an order and such amount of postage is actually paid over, the €1 may be treated as exempt. Similarly, if a car hire company charges €50 for motor insurance, and that amount is actually paid over in full to insurers in the name of the lessee, the €50 may be treated as exempt. However, if a charge is made for posting and/or insurance, and a lesser amount is paid over by the supplier to An Post or to the relevant insurance company, the charge made to the customer is regarded as part of the total price of the goods/service supplied, and is subject to the VAT rate applicable to the goods/service in question.
» Back to Top
Treatment of mixed transactions - (package rule)
5.8 If an article comprising goods taxable at different rates is sold as a unit for a single consideration, (for example, a story book and accompanying cassette) VAT is payable on the entire amount charged at the rate applicable to the higher VAT rated item. The same principle applies to services liable at different rates or to a mixture of goods and services.
This is what I found on HM Revenue & Customs ( HMRC Reference:Notice 700/24 (April 2003)) which is very similar to the Irish regulations above:
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2.3 What if I have to deliver the goods and I make a charge for this?
The important test is whether delivery is included in the contract. You are making a single supply of delivered goods if, under the contract, you have to deliver the goods to a place specified by the customer. This might include the customer’s:
The important test is whether delivery is included in the contract. You are making a single supply of delivered goods if, under the contract, you have to deliver the goods to a place specified by the customer. This might include the customer’s:
- own address;
- friends or relatives; or
- their own customers.
So if my examples above are correct and I have to add VAT on shipping to some but not all of my packets sent to my customers, do you know if there is a contribution that does this or do you have any idea where I need to make changes so that this is calculated correctly?
Thanks in advance for your help.
abra
