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jerry12953

jerry12953

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Jeremy Moore
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I've just bought a small item from Wex and on examining the invoice noticed that the the carriage charge was £3.99, of which the VAT content was £0.40. So I got my calculator out and worked out that the VAT content on £3.99 should have been £0.665p. It wasn't rocket science.

This is the reply I had from them -

"You are correct that VAT is typically charged at 20%. Based on the delivery charge of £3.99, the VAT included should indeed be £0.66. However, this is subject to different parameters on our system, and what we would work out ourselves on a calculator is not necessarily the same amount on an invoice. In this case, this is correct"

I wonder what HMRC would say about that?
 
The delivery charge is likely made up of more than one element, not all of which may be subject to VAT; I surmise.
 
You could ask for clarification on what exactly these “different parameters” were in your case?
 
lindsay said:
The delivery charge is likely made up of more than one element, not all of which may be subject to VAT; I surmise.
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Possibly a portion reduced rate or zero rated, not sure what though in this case if the delivery was a standard rated item
 
You might get an answer on the Wex thread, they seem to be pretty proactive on there.
 
VAT can be complicated. Could be they are using an apportionment method.
 
jerry12953 said:
Used - so there was no VAT content on the price of the item. But delivery is a separate charge, isn't it?
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They may be using the margin scheme which calculates VAT at one sixth of the difference between the sales price and the purchase price. These prices may include delivery.
 
jerry12953 said:
Brentor said:
They may be using the margin scheme which calculates VAT at one sixth of the difference between the sales price and the purchase price. These prices may include delivery.
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The delivery charge is separate to the cost of the item. There is no VAT element in the item.

I have re-posted this in the WEX thread (I didn't know there was one) so we will see what they come up with.
 
Umm... Just doing the maths in my head but isn't 20% of £3.99 = 80p?

The rate of VAT charged on delivery is, or would be the same as the VAT rate on the item as the VAT is normally calculated on the total including postage, but reduced rate is 5% or 0%. 40P is 10% so sounds like VAT is only applicable to part of the delivery charge.

Getting a simple answer to a tax query is always going to be a tough ask. :)
 
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It could also be the VAT on the postage doesn’t include the stamp. You don’t charge VAT on a postage stamp do you?
 
Andrew564 said:
Umm... Just doing the maths in my head but isn't 20% of £3.99 = 80p?
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It is, but the VAT is calculated on the ex-VAT amount, £3.99 is the incl VAT amount.
 
They may not be paying the cost you pay them for postage, so the VAT they listed would match service they used and rest is covered by the total VAT?
 
That makes sense Gav. The £3.99 postage is a nominal fee, not the actual postage charged to WEX.
 
DPD etc charge flat rate fees for parcels, Royal Snail charge a fee based on size, weight and service so changes.
 
Andrew564 said:
Umm... Just doing the maths in my head but isn't 20% of £3.99 = 80p?

The rate of VAT charged on delivery is, or would be the same as the VAT rate on the item as the VAT is normally calculated on the total including postage, but reduced rate is 5% or 0%. 40P is 10% so sounds like VAT is only applicable to part of the delivery charge.

Getting a simple answer to a tax query is always going to be a tough ask. :)
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20% of £3.99 is indeed 80p but that isn't the vat here. The original post is correct with 0.665p
Pound Coin said:
It is, but the VAT is calculated on the ex-VAT amount, £3.99 is the incl VAT amount.
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Because this ^

The pre-VAT price would be £3.325. 20% of that (0.665) is added to that to get the price with VAT.
 
If I send a parcel via Parcelforce and charge my customer for carriage, I can't charge VAT on the cardboard box but not on the "stamp". It's just a standard charge which is VAT-able like anything else. To go down that road would be madness. Madness, I say..... :wave: :naughty:
 
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From accounts and legal "... the general rule is that VAT treatment for delivery would follow the supply of goods...."

If buying used equipment the margin exception vat rate would apply which is less than 20%.
If using Royal Mail that would be 0 rated for vat but you are not just paying for the Mail part, you are buying post and a second thing packing.
So one part may be 0 and another part of the charge may be less than 20% but is gets quite murky to calculate after the fact.
I would be very surprised if a company the size of Wex which is primarily a mail order business had not used a crack team of accountants to check they were paying the correct amount, a cynical person might suggest the correct and most profitable amount but I wouldn't go that far.
 
ilikebowens said:
From accounts and legal "... the general rule is that VAT treatment for delivery would follow the supply of goods...."

If buying used equipment the margin exception vat rate would apply which is less than 20%.
If using Royal Mail that would be 0 rated for vat but you are not just paying for the Mail part, you are buying post and a second thing packing.
So one part may be 0 and another part of the charge may be less than 20% but is gets quite murky to calculate after the fact.
I would be very surprised if a company the size of Wex which is primarily a mail order business had not used a crack team of accountants to check they were paying the correct amount, a cynical person might suggest the correct and most profitable amount but I wouldn't go that far.
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I don't fully understand VAT but it will look very odd in my own accounts if the VAT content on £3.99p is £0.40p.

I thought of contacting HMRC about it but life is too short.
 
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