Setting up VAT rules for the UK in Magento can be quite confusing. Particularly if you sell to The Isle of Mann & The Channel Islands. As I am asked this question regularly, this blog post intends to simply explain the correct configuration for most UK VAT rated businesses (selling products not services) this is correct for 95% of my Magento clients.
The main points:
- Tax rules apply to where the good are going to (Delivery Address) – not the invoice address.
- 20% VAT is charged to everyone whose delivery address is in the UK (consumer or business).
- 20% VAT is also charged to everyone who is shipping to the EU (but if you are VAT rated and the buyer adds a valid VAT number the VAT charge is ZERO – this is excluding the UK)
- VAT isn’t charged to orders shipping to outside the UK or EU.
- The Channel Islands (Jersey, Guernsey, Alderney, Sark and Herm) – Aren’t in the UK or the EU for the purposes of VAT – VAT is Zero rated for products shipping there.
- The Isle of Mann – isn’t part of the UK or EU either but is considered to be part of the UK for the purposes of VAT – therefore VAT is charged.
Disclaimer, I’m not a Tax accountant, I take no responsibility for this setup & for setting it up incorrectly or indeed if the rules change (please note this may happen after Brexit – See our Brexit Web Services for more information). Please also note, that some products / services aren’t Vatable and have their own special rules – use at your own discretion and responsibility.