If your online store has been going from strength to strength, you need to look at charging VAT. Fortunately, VAT for online stores will be covered by many of the same rules as physical retailers. When your business charges VAT to the customer, you are acting as an unpaid tax collector for the revenue services. Every quarter, you will need to hand the VAT to the tax service and you need to know how this is done.
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Selling Online Or Selling From A Physical Store
When it comes to VAT, selling from a physical store and online are not seen as different. The only issues come when you are selling digital products and services which will be covered by different VAT rules. If you are selling your goods online, you are essentially using the internet as a means of distribution and communication as well as the receipt of payment. This will be the same as when you are selling in a physical store.
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If you have registered for VAT, you will need to make this clear to the customers of your online store. The prices that you show on the store could be shown as VAT inclusive and you do not have to list the VAT separately.
Should You Register For VAT?
If you have an annual turnover of more than a set amount in regards to taxable goods, you will need to register or face a fine. If your turnover does not meet the threshold, then you will not have to register for VAT or charge VAT. It is important to note that the threshold is not based on the calendar year, but is a rolling 12-month basis.
What Rate Of VAT Should You Charge?
There are 3 different VAT rates that you can charge and for most items, this will be 20%. However, there are some goods which have a VAT rate of 5% while others are charged at 0% and are known as zero-rated items. There are also some goods which are exempt from VAT.
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This is where things can become a bit complicated. A zero-rated item is not always VAT exempt and can still be VAT-taxable, but you need to charge your customers 0%. An example of this will be children’s clothing which is zero-rated. However, you will still need to record all of the sales and report them on your VAT return. These goods will also count toward the 12-month threshold.
What About International VAT?
If you are based in the UK and have customers in the EU, you will need to charge the VAT rate in the country your customer resides in. However, if you are selling to a customer that is VAT-registered, you could charge 0% on the goods. If you are going to be selling to customers located outside of the EU, you will not charge VAT. Of course, there are some exceptions to this rule and you will need to check with the tax services before you do anything. If you want more information on VAT check out this Gap Report here for details.
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Does VAT Affect Your Delivery Costs
When it comes to the delivery costs of your goods, the VAT you charge will vary depending on the rate that is applied to the item you are selling. If you are selling a printed book which is zero-rated, you will have a 0% rate applied to the delivery costs. However, if you are going to be offering free delivery, the VAT will be incorporated into the price of the item.