Testing UK VAT processing...

[Guest]

Hello All!

I'm new to the support forums, but have been using CubeCart (v4) live for a year, and have now hit the dreaded VAT threshold... so, it was with some dispondency that I read this - - VAT writeup...

Un-detered though, I started testing my own store, and to me it doesn't look that bad? or am I missing something?

I started by setting all my products to being "Prices include tax" and setting the (current) rate of VAT to 17.5% -

And then set up all the tax rates for the whole of the EC countries and the UK -

Then, I closed the store temporarily and set the tax settings to charge sales tax to customers who qualify and to do it by delivery address -

Then I did some test transactions -

1. UK Customer

So, this is what I get at the checkout -

So, as expected, the price of the product is shown as the retail price of £80 - which it is in the product listings, as I don't want VAT added on at the checkout, that would appear very unproffesional!

The subtotal is shown at £82.98 which is the price of the two products not including the VAT, the shipping is shown at £5.41 which is a standard parcel at £4.41 plus my standard one pound packaging charge, so the postage price is also shown not including the VAT, and then VAT is shown at £15.47 which is VAT on the two products plus VAT on the postage... which being as I am selling all VATable products I have to charge VAT on the shipping charge too...

Sooo, that all looks fine to me? most of my customers are UK based, source - http://www.bits4vits.co.uk/store/index.php?_a=viewDoc&docId=25

So, next a -

2. EC Customer

So, this is what I get at the checkout -

As I set the delivery address to be FRANCE, as an example...

So, the same set of results as the UK customer above, only the shipping charges has gone up, so, so has the VAT and also the Basket Total

So, that looks all ok, apart from the consideration of having an EC customer who is VAT registered? My thoughts on this are that as my company is a B2C setup not B2B, i.e. I only want to sell the the retail customer, the end user of the products, and not to wholesale to a business customer and have to not charge VAT and be asked for business discounts on products. So I figure by putting a disclaimer on the site within the T&Cs saying that my company only sells to retail customers, that should cover that?...

So, finally a -

3. Non-EC Customer

So my example a USA customer -

Now, what a US customer sees (or any where else is the world outside of the UK or EC) is the retail price of the products, and what every other customer in the world sees that price at, but when they reach the checkout they see the retail price of the products plus the delivery charge to that country, with NO VAT shown...

In essence these prices should actually be less VAT, i.e. VAT exempt and not including the VAT content of the retail price, BUT... thinking about it, as a VAT registered company, my prices will be based on the calculation of the VAT proportion within the product, i.e. "we" (VAT registered businesses) "lose" the difference between the output VAT and the input VAT. So, let's say that £80 product in the example costs me £60 -

So wholesale price was £60, so the VAT content of the purchase price is £8.94, i.e the product cost me £51.06 + VAT, for the sake of this example...

I sell the product at £80, so the VAT content of the selling price is £11.92, i.e. the product sells for £68.08 + VAT

So, the VAT "we" have to send to the revenue (using simplistic example) is £11.92 - £8.94 = £2.98

So, in my pricing, I figure in the calculations to get to a retail price, i.e. the product cost, an element of overheads, the VAT on the product and the shipping (lets say £2.98 for this example), payment processing fees, etc, etc, to work up to the retail price we need to charge to make a profit on it...

Now, if we then have to knock off all the Output VAT (£11.92 in the example) as we're selling to a non-EC country, the £2.98 we calculated for the VAT "loss" on the product becomes £11.92, so we've "lost" the £8.94 from the calculated retail price, and will end up suffering a loss on the product...?

Soooo... (I'll get there in the end!) I'm thinking of leaving the retail prices as they are, so that non-EC countries pay the normal full retail price on the site, i.e. £80 on the example we're using, so we effectively "make" an extra £2.98 on the product... rather than losing on it?

So, to me the whole VAT procedure seems to work as I want it?

Or am I missing something basic?