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bigduckontax, Accountant
Category: Tax
Satisfied Customers: 4947
Experience:  FCCA FCMA CGMA ACIS
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# We provide a retail service. We have a website and we resell

### Customer Question

We provide a retail service. We have a website and we resell groceries from a particular store. We add a 15% markup on all products (our margin) and our delivery fee is £4.5
How should we pay VAT? Can we just calculate the amount of VAT from our profit, which is (15% markup + £4.5 delivery fee), take 20% and add the 20% at the final bill on our website, stating (VAT included) and let the customer pay the VAT? Here is the example:
1) Imagine the grocery bill is £20
2) We add 15% markup, which is now £3 and also our delivery fee of £4.5
3) The bill with our margin and the delivery fee is now £20 + £3 + £4.5 = £27.5
4) The final bill with VAT is then £27.5 + 20%*£7.5 = £29 (So we let the customer to pay £1.5)
Submitted: 1 year ago.
Category: Tax
Expert:  bigduckontax replied 1 year ago.

Unless your turnover reaches or approaches 83K in any one year you can forget about VAT.

Why would your customer pay GBP 1.5 to settle a 29 quid bill? 27.5 plus VAT is 33, not 29. Your arithmetic seems a tad odd.

Customer: replied 1 year ago.
It is £29, as our margin with delivery fee is £7.5, so the VAT should be 20% from that amount, not from the whole bill (as grocery store that sells the groceries already has VAT included)
Expert:  bigduckontax replied 1 year ago.