VAT mistakes are expensive to unwind, so it is worth setting Shopify up carefully before launch. This guide covers the store settings. It is not tax advice, and your accountant should confirm what applies to your business.
Show prices including VAT
UK consumers expect the price they see to be the price they pay. In Shopify's tax settings, choose to include tax in prices. Shopify then works out the VAT inside each price at checkout.
Register and enter your VAT number
Once your business is VAT-registered, add the UK as a tax region in Shopify and enter your VAT number. HMRC sets the registration threshold, so check the current figure on GOV.UK.
Products at different rates
The standard rate applies to most goods, but some products are reduced-rate or zero-rated, such as many children's clothes and books. Shopify lets you set tax overrides for collections so those products are charged correctly.
Shipping
Decide whether VAT applies to your delivery charges, which normally follows the VAT treatment of the goods. Shopify has a setting for charging tax on shipping rates.
VAT invoices
Business customers will ask for VAT invoices showing your VAT number and the VAT amount. Shopify's order printer or an invoice app can produce compliant invoices automatically.
Selling to the EU
Since Brexit, goods sent from the UK to EU customers are imports. For lower-value consignments many merchants register for the EU's Import One-Stop Shop (IOSS) and collect EU VAT at checkout, so customers do not face unexpected charges on delivery. Shopify Markets can show local prices and duties. Northern Ireland has its own rules for goods, so take advice if you ship there.
Test before launch
Place test orders for a standard-rated item, a zero-rated item, a UK address and an EU address. Check the VAT on each order and invoice. We include this testing in every UK Shopify build.