Advice on VAT on Packaging and Posting Costs Appreciated....

blobert

Hi Guys,

Just want to get your opinion on this. Sell goods online, was previously charging customers exactly what An Post was charging me to post but have recently got lower rates from them for some services but want to keep the same charge. The VAT Guide says:

Where amounts are charged separately for postage and insurance and paid over in their entirety to An
Post or to the insurer on behalf of customers, suppliers may treat such charges as not being subject to
VAT. If, for example, a trader charges an extra c5 for posting an order and such amount of postage is
actually paid over to An Post, the c5 may be treated as exempt. Similarly, if a car hire company charges
c50 for motor insurance and that amount is actually paid over in full to insurers the c50 is treated as
exempt.However, if a charge is made for posting and/or insurance, and a lesser amount is paid over by
the supplier to An Post or to the relevant insurance company, the charge made to the customer is
regarded as part of the total price of the goods/service supplied, and is subject to the VAT rate applica-
ble to the goods/service in question.

I realise that if I'm charging €5 for postage whereas it's only costing me €2.50 now I should be paying VAT on the €5 according to the above.

Is there a way of minimising this? What if on an invoice/order breakdown I put down a packaging charge of €2.50 (which I pay VAT on) and the actual postage cost of €2.50 (which is VAT free).

Would this be ok to do?

Any advice would be much appreciated. While it's good to get a reduced postal rate it's not so great if a lot of the saving will be eaten up by paying VAT where I did not have to before. Unfortunately the price of the goods is set, ie I can't just increase the price of the main goods and offer the reduced postage rate to give the customer the same overall price while still having VAT free postage.

Thanks

blobert

Any advice on this?

Have emailed Revenue on this but not got a reply yet.

ssbob

blobert wrote: »

Hi Guys,

Just want to get your opinion on this. Sell goods online, was previously charging customers exactly what An Post was charging me to post but have recently got lower rates from them for some services but want to keep the same charge. The VAT Guide says:

Where amounts are charged separately for postage and insurance and paid over in their entirety to An
Post or to the insurer on behalf of customers, suppliers may treat such charges as not being subject to
VAT. If, for example, a trader charges an extra c5 for posting an order and such amount of postage is
actually paid over to An Post, the c5 may be treated as exempt. Similarly, if a car hire company charges
c50 for motor insurance and that amount is actually paid over in full to insurers the c50 is treated as
exempt.However, if a charge is made for posting and/or insurance, and a lesser amount is paid over by
the supplier to An Post or to the relevant insurance company, the charge made to the customer is
regarded as part of the total price of the goods/service supplied, and is subject to the VAT rate applica-
ble to the goods/service in question.

I realise that if I'm charging €5 for postage whereas it's only costing me €2.50 now I should be paying VAT on the €5 according to the above.

Is there a way of minimising this? What if on an invoice/order breakdown I put down a packaging charge of €2.50 (which I pay VAT on) and the actual postage cost of €2.50 (which is VAT free).

Would this be ok to do?

Any advice would be much appreciated. While it's good to get a reduced postal rate it's not so great if a lot of the saving will be eaten up by paying VAT where I did not have to before. Unfortunately the price of the goods is set, ie I can't just increase the price of the main goods and offer the reduced postage rate to give the customer the same overall price while still having VAT free postage.

Thanks

Hi Blobert,

Firstly VAT is neutral if you are in business so you won't really be losing out but just to clarify:

Yes you would be ok to put down a seperate charge for packaging and have VAT charged on that.

Are you registered for VAT?

blobert

Thanks for the reply.

I am VAT registered and the price to the customer is inclusive of VAT. The price is set and can't go up so if I have to start paying VAT on delivery it's not a charge I'll be passing on to the customer so it will hit my profits.

So just to clarify, if I was charging €5 for postage and this was VAT free (I was paying An Post the full €5) but then my postage price falls to €2.50, it would be acceptable for me to offer the customer a packing and postage charge of €5 in total. Then in their invoice there would be a breakdown of €2.50 packing (on which I would pay VAT) and €2.50 actual postage charge on which there would be no VAT as it was the actual An Post rate.

Does this sound about right?

Thanks again for your help.