Update 01/01/2021 – With the final ending of the UK’s membership of the EU, the rules on VAT now apply only to UK customers. Everyone else can breathe easily and not bother to wade through this post (unless you really want to, of course…).
Towards the end of last year, I wrote a post on the Royal Mail’s last posting dates before Christmas, commenting that I thought it would be “our least exciting post of the year“. This year I’m getting in early for that accolade with this piece.
I had a number of emails during the sale concerning the way our shopping cart system works, in particular related to the application (or non-application) of VAT – customers outside the EU worried that it hadn’t been deducted correctly, or others in the UK or Europe questioning why a big lump of tax had been added to their order when they checked out. So this is my best attempt to explain how it all works and who or what it applies to. I’m not an accountant, which I’m hoping will be an advantage as I’ll try to explain things from my layman’s point of view. I’m also looking at it from the point of view of the Brigade website only, there may be some special cases or rates that don’t apply to us, in which case I won’t complicate matters with those. So if you’re all sitting comfortably, then I’ll begin…
VAT stands for Value Added Tax – it’s essentially a sales tax. In the UK it’s levied on most goods and services, although only if the company supplying them is registered for VAT. Companies over a certain annual turnover threshold (currently £85000) are required to register for VAT in the UK, although ones with a lower turnover can voluntarily register (there are advantages to being registered – for example, you can claim back any VAT you pay out). Incidentally, this needs to be borne in mind for overseas customers ordering from other sites – I’ve seen complaints on TMP for example complaining that company X didn’t deduct VAT for an order from the US or Canada, when company X may simply not have been registered in the first place. But that’s by-the-by, since Brigade most certainly is VAT registered.
The current rate of VAT for most goods is 20%; there are some different rates for other specific items, but none of these apply to Brigade except for books, which are zero-rated (which means that although they are technically eligible for VAT, the current rate is 0% so no tax is charged on them).
Prices on our website or blog are always given with VAT included. So an item that is listed at £6 is actually £5 plus 20% (£1) VAT. On the website we state the amount of VAT on each item page, but if you’re trying to work it out for yourself, remember that VAT is 1/6th of the total price (not 1/5th, as might seem the obvious calculation).
The Shopping Cart
The way the cart works has changed slightly. The values that go into the cart are without VAT – so if you add our previously mentioned £6 item to the cart, the value that actually goes into it is £5 (plus the shipping cost for the item is added to the running total). VAT is only added later once you give the system your shipping address and it can then determine whether or not you need to pay the tax. If you’re within the the main 28 EU countries (not those in the EEA) then you will be charged VAT; anywhere else in the world, you won’t. So when you checkout, if your delivery address is within the EU, 20% will be added to the order total. But remember, the value that went into the cart was without VAT, so the total amount you will be charged is still the same as was stated on the website initially.
HMRC have decreed that VAT also has to be added to any shipping costs at the same rate as the rest of the order. If you place an order for books only then that rate will be zero, so no VAT is added. If the order is a mix of books and other items, then the higher rate of 20% VAT is added to the entire shipping cost.
Below are five images showing an example from start to checkout. I’ve captioned each image so as you scroll through the gallery, hopefully everything will become clear!
OK, I think that’s it – I hope it all makes sense, but if anyone has any questions (or, just as importantly, if I’ve got anything wrong or could explain it better), please let us know.
I’ll now get back to the far more interesting and important task of making little model tanks and spaceships now…