In the last three months, our small company has branched out into selling goods on eBay and posting them to customers. Now the time approaches to fill in my VAT form.
My question is, should the cost of the stamps I buy to post the items to customers be included in the total for Box 7 (Purchases excluding VAT), even though stamps are exempt from VAT so nothing relating to them will appear in Box 4, the reclaimed VAT?
As our business is very small, including or excluding the postage from Box 7 makes quite a difference. In previous VAT forms the total for Box 7 was such that Box 4 was almost exactly 20% of it, or 17.5% before the change. Although logic suggests that this does not always have to be the case I must admit the difference is making me nervous!
Hate to tell you this but if you charge postage on to your customer you should add VAT to it (or take the VAT hit yourself). Whilst stamps are exempt when you buy them from the post office (or wherever) once you sell them on they become something you have supplied and therefore you have to charge VAT on them.
Hi there, just a quick query regarding this, I have a client who for example total sales on ebay are £20,000, i.e. what money comes into the paypal account from the customers (which also includes the postage) and when I input these sales I calculate the vat to be inclusive of the £20,000, I hope this is correct and not £20,000 plus VAT, would appreciate clarification, as just had a bit of a panic. Thanks Julie
Semsley, thank you for your reply. Fortunately, I am already doing that (charging our customers Sales VAT on the postage, because we are providing delivery as part of the service) - in fact it was on this very forum that I found out that I had to.
The part I am uncertain of is about the stamps as input, rather than the fact that we send out parcels as an output.
I am clear that postage provided by the Post Office is exempt from VAT (T2 on Sage). But does the simple cost of the stamps go on the VAT as part of my total for purchases in Box 7? It is part of our purchases, after all, which makes me think yes. On the other hand, it is exempt from VAT, which makes me think no.
Julie Hall, I feel a little embarrassed to be answering your question when I am pretty new here and very much a learner - but, for what it's worth, when we do the equivalent calculation we have been calculating the VAT such that the net sales plus the VAT adds up to £20,000. in other words the net sales are £20,000 / 1.2 = £16,666.67 and the VAT is £3,333.33 in your example.
(With the added complication that any sales outside the EU have to be subtracted first, as they don't have VAT.)
Hi there, thanks for the reply, I think you are right re 20,000 I just had a bit of a memory block The postage should be shown in box 7, as it is still a vat rate even though it is exempt, and it is not outside the scopt of VAT. Further clarification from someone else would be great, but I am almost £100% sure.
