UK stores that don't charge VAT on postage

[mevaman]

I confirm what PCW has written is entirely correct.

 

VAT is chargeable on all goods and services supplied by a VAT registeted shop including the postage regardless of whether VAT has been charged by the postal supplier (including Royal Mail).

[raymw]

 

As mentioned earlier, if 'normal' royal mail postage to UK, then there is no VAT on the postal charges, Hattons neither pay, or receive payment for the VAT. Nothing wrong with their invoice in that case. However, if, they do not use Royal Mail (and this may be why they want to use Yodel), then they will be receiving a VAT invoice from Yodel, but not collecting VAT on the outgoings. HMRC would be interested in that, I suspect.

 

Agreed, the above could be worded better. Not having seen an invoice from Hattons, but from the OP's description, there appears to be nothing wrong with it, since under £250.00 items do not need to be itemised - although they have itemised some, and apparently not separated VAT on the postal charges.  That does seem odd, but not sure if it is anything more than that, I do not think there is an HMRC requirement for them to do it any other way. The way it appears to be presented is that the customer is not paying VAT on the postage (but if their accounts department(or HMRC) works on the total cost of the whole transaction, then they should be). If they use a non Postcomm licensed  service they will get a VAT invoice, which allows that input tax to be reclaimed. Unless they are operating some sort of disbursement/direct mailing service (and presumably in that case the invoice would/could be different,) then the VAT paid to HMRC will be a percentage of the total cost including postage. Anyway, I know what I'm going on about....almost

 

fwiw, I phoned Hattons at about mid-day, asking their accounts dept to phone back - I doubt if they will.

[Mike at C&M]

I have now heard from my accountant, and his reply sums it up simply:

"If you are responsible for the delivery of the products to your customers then any charge for delivery should have VAT added to it at the rate that is applicable to the main supply.

This is because your supply will be seen as a single supply with the delivery costs incidental to the main supply."

Time to change the system.

[BG John]

Time to change the system.

In the "best time to plant a tree is 20 years ago, the 2nd best time is now" sense!

[Not Captain Kernow]

I have now heard from my accountant, and his reply sums it up simply:

 

"If you are responsible for the delivery of the products to your customers then any charge for delivery should have VAT added to it at the rate that is applicable to the main supply.

 

This is because your supply will be seen as a single supply with the delivery costs incidental to the main supply."

 

Time to change the system.

Correct - but remember that if the order you are sending contains nothing but zero rated items (for example books and magazines) then the postage is also zero rated for that transaction only.  The order must contain no VATable items whatsoever, so if someone has ordered £300 of books and one pack of fishplates you must charge VAT on the postage, but if there is nothing but zero rated items you don't include VAT on the postage.

[mevaman]

87029, I am sorry that this will have an impact on your bottom line. However, this means that you are now accounting correctly and need not fear a VAT inspection.

 

I hope that Hattons are also accounting correctly as they are competing unfairly if not!

[Mike at C&M]

Strangely, there has been a sudden increase in our postal charges as of today.

[Jonboy]

Strangely, there has been a sudden increase in our postal charges as of today.

 

You have my sympathy when it comes to dealing with the "but postage is VAT free" enquiries that will now start rolling through...been there, done that, don't miss the retail side of work at all!!!!!!

 

(and being cynical it does end up much easier to go down the "it is a P&P charge and therefore VATable" explanation than trying to explain the standard rate/zero rated goods area to many non-accounts minded people).

[PCW]

I wonder if one day soon Hattons will have a sudden strange increase in postage charges?

 

Or just a change of printed info on the invoice to become compliant if they are indeed already handing over the 67p of VAT on the postage.

 

Or will things just carry on the same, surrounded by deafening silence?

[mevaman]

I suggest that as concerned tax payers, one of us might want to refer the matter to HMRC's compliance unit!

[PCW]

Yes, a bit of a moral dilemma isn't it. Whilst we don't particularly want to drop a model shop in it there are a  couple of things to consider:

 

1.  If, and it is only an if, allegedly, perhaps they are not paying the correct level of VAT then all members of society are loosing out on the quality of public services that can or cannot be paid for from the public purse, while the shop concerned, perhaps, allegedly might be banking more profit than they should. 

 

2. If any shop does not collect the correct amount of VAT on postage they are gaining an unfair competitive advantage over other shops that do things properly.

 

So, what do folks reckon, should someone volunteer to refer the matter to HMRC, or perhaps if someone knows any of the directors of Hattons perhaps they could have a quiet word to give them the opportunity of correcting things?  What is the best way forward with this?

[Metr0Land]

Given that comments on various threads on rmweb seem to be positive about this retailer then I don't think we should be too heavy-handed too soon?

[bingley hall]

So the subject title was UK stores?

 

But as usual on RMWeb, only one retailer is singled out more than others and no doubt a bit of mud starts to stick

 

Some are suggesting that Hatton's be dobbed in.

 

Surely a genuine complainant would be requesting HMRC to investigate that all model railway shops

are strictly adhering to VAT guidelines on postage rather than just singling out one for special attention. 

[Cliff Williams]

Hattons have this in the footer of every web page. Worth noting as the prices when displayed on "Add to cart" they are VAT inclusive, you only get to the detail when your invoice is raised.

 

All prices include VAT at the current rates but are subject to change without notice.
Company Registration Number 5131251, VAT Registration Number 163 7710 60
Registered Office: 364-368 Smithdown Road, Wavertree, Liverpool, L15 5AN

 

[PCW]

This is good news, I'd hate to see any shop hit by a sudden unexpected bill for wrongly calculated VAT. 

 

This thread considered it a strong possibility Hattons might be accounting for the VAT but for some reason not showing it correctly on the sales invoice. This has now proved to be the case.

 

I wonder if they will go the extra mile and actually now start producing invoices that are compliant? 

[mevaman]

Interesting.

 

I assume that Hattons will now produce invoices that comply with VAT law.

[MarkGauden]

Interesting.

 

I assume that Hattons will now produce invoices that comply with VAT law.

There is a possible legitimate reason why Hattons do not itemise any VAT that is included in their £4 charge, there is no VAT on certain products (eg. magazines, books, brochures, catalogues).  Therefore Hattons may well follow what HMRC say they can do in such circumstances [source = some v1-37 VAT guidance that I have a copy of]:

Charges for post and packing follow the overall liability of the supply, and if mixed supplies are made, an

appropriate apportionment will need to be made. It is common practice in the mail order industry for

apportionment of postal charges to be calculated on an annual basis each quarter, and the SR/ZR

percentage split will be applied to all postage charges in that quarter.

PS. Plantiflor Ltd (Spalding Bulb Co) challenged this treatment, claiming that it was acting as an agent of the customer in arranging for the supply of delivery services by the Post Office, taking payment on behalf of the Post Office, and allowing customers to make alternative arrangements for delivery of their goods. As a result of this the company claimed that the post charge was an exempt disbursement. This case was overturned by the House of Lords in 2002.

[mevaman]

I don't think that this applies in the case of a supplier who is charging an amount for postage AND PACKING. The amount charged by Hattons is not just a recharge of what they pay their postal supplier. Hattons and others are charging for a service and, as such, this is liable to VAT regardless of whether the item sent is VATable or not.

 

So, if a non VATable item, such as a book, is being sent with a standard charge for P&P, then VAT must be charged on the latter.

 

Therefore, the VAT must be reflected on the invoice, as this is the 'tax point', even if the order contains non VATable items.

 

Andrew

[mevaman]

Just to reiterate, this link also makes the position clear

http://www.jma-accountants.co.uk/news/pages/8.html

[PCW]

Thanks for the link ME van, very interesting. This thread has caused me to read up a lot of info in the various gov.uk VAT notices and everything does suggest Hattons should change the way they display the VAT on their invoices.

[Torper]

As I understand it, and as one or two people have already pointed out, for retail sales under £250 a business can issue a "simplified VAT invoice" that merely has to show a total sum inclusive of VAT - it does not have to show the total excluding VAT and the total amount of VAT separately (https://www.gov.uk/vat-record-keeping/vat-invoices).   As Hattons are subjected to regular compliance check visits by HMRC, and as their VAT practices have been reviewed and approved during such visits , I doubt very much that they are acting improperly.

 

Of course, if they were to issue an invoice for over £250, then VAT would have to be itemised and shown separately.

 

DT

[mevaman]

DT

 

The point is that Hattons do not produce a simplified invoice as they show the VAT, but only for the goods and not the P&P. If they didn't separately show the VAT amount on all invoices under £250 it would be a different matter.

 

As you say, assuming that the VAT inspector is aware of Hatton's invoicing, then all must be OK!

 

Probably, I've said enough on this topic!

 

Over and out.

 

Andrew

[bingley hall]

DT

 

The point is that Hattons do not produce a simplified invoice as they show the VAT, but only for the goods and not the P&P. If they didn't separately show the VAT amount on all invoices under £250 it would be a different matter.

 

As you say, assuming that the VAT inspector is aware of Hatton's invoicing, then all must be OK!

 

Probably, I've said enough on this topic!

 

Over and out.

 

Andrew

 

 

I still think you need to explain this compulsion to single out Hattons for attention, even after they have explained their processes are compliant.

[mevaman]

Hi Bingley Hall

 

I only highlight Hattons as I am very aware that other Mail Order suppliers' invoices correctly show the VAT.

 

It's all about a level playing field.

 

Andrew

[Torper]

DT

 

The point is that Hattons do not produce a simplified invoice as they show the VAT, but only for the goods and not the P&P. If they didn't separately show the VAT amount on all invoices under £250 it would be a different matter.

 

 

Why would it?  There's nothing in the regulations to say they can't do it in the way they are doing it.  They're showing a grand total at the end of their simplified VAT invoice and, presumably, accounting to HMRC correctly as otherwise they'd be in considerable trouble.  A firm as big as Hattons will have been having regular compliance checks ever since VAT was introduced and I am aware from personal experience that these are pretty rigorous and any non-compliance with something as basic and obvious as their invoicing system would have been discovered and remedied.

 

I'm sure that it's not Andrew's intention, but I'm concerned that this thread is beginning to sound a bit like a witch hunt against one of our longest established and most valuable retailers.

 

DT