VAT on delivery costs
This guide explains how VAT is applied to delivery charges on your ShopWired store, including how the system handles orders with zero-rated, VAT-exempt, and standard-rated products, and how this compares to HMRC guidance.
General VAT rules on delivery
Under HMRC’s VAT Notice 700/24, the VAT treatment of delivery charges generally follows the liability of the goods being supplied when delivery is part of a single supply of delivered goods.
- If you deliver goods and make no separate charge for delivery, VAT is included in the overall price of the goods
- If you do charge separately for delivery, the VAT treatment depends on the VAT status of the goods and whether delivery is part of the contract.
HMRC also states that when a basket includes goods with mixed VAT liabilities (e.g. some standard-rated and some zero-rated), the delivery charge should be apportioned between the goods.
ShopWired applies a simplified, conservative approach:
- If all products in the order are zero-rated or VAT-exempt, ShopWired does not apply VAT to the delivery charge
- If any product in the order is subject to VAT, ShopWired applies full VAT to the delivery charge
This means that ShopWired does not apportion the VAT on delivery between standard-rated and zero-rated products.
Why doesn't ShopWired apportion VAT?
Why doesn't ShopWired apportion VAT?
There are several reasons why ShopWired doesn't apportion VAT on delivery costs:
- Apportioning VAT adds complexity for both the platform and merchants
- ShopWired's approach never results in underpayment of VAT
- It either charges the correct VAT or overpays slightly in HMRC’s favour
- Many ecommerce platforms and merchants follow similar conservative practices, where full VAT is charged if any product in the basket is VATable
- Where delivery is contractually required, it is often treated as part of a single supply of delivered goods, allowing a consistent VAT treatment for the full supply
VAT equivalent pricing
VAT equivalent pricing
On the VAT settings page, there is an option:
Charge customers the (full) VAT equivalent price for delivery when all products in the order do not attract VAT?
If you enable this setting, ShopWired will:
- Continue to treat the delivery charge as non-VATable when all products are zero-rated
- But still charge the VAT-inclusive equivalent amount by adjusting the net delivery price upwards
This ensures consistency in delivery pricing, regardless of the order’s VAT status. Read more about this setting.
If you require full apportionment
If you require full apportionment
If your business needs to follow HMRC’s apportionment method strictly, such as for detailed VAT reporting or compliance reasons, you may wish to:
- Consult your accountant for guidance
- Manually adjust delivery VAT outside of ShopWired (e.g. through accounting software or invoices)
