Unfortunately Linnworks isn't providing the correct VAT calculations.
We have set our UK VAT default to 20. We sell a mixture of adults and kids clothing. Our kids clothing has a zero rated override in the inventory item.
If we sell a kids clothing item and the customer pays for shipping, Linnworks calculates the item tax as zero but the shipping at 20% (it uses the UK default of 20% to do this rather than the HMRC rule of shipping tax rate follows the tax rate of the item being sold).
This means our VAT returns have always been incorrect since we stated using Linnworks many years ago, as we have been paying HMRC 20% of this shipping cost when we should have been keeping that portion.
We are now looking into submitting a correct for the last 4 years to claim back our overpaid VAT.
In the future the only way to calculate this correctly would be to ensure OrderItemTaxRate column is shown on our monthly sales download. We can then manually correct the tax calculations on the one where this column shows a zero.
It would be nice if Linnworks just calculated the correct VAT reporting information for us rather than us having to do this extra work. Also I am unsure how many other customers would be unaware of the incorrect information that they are submitting to HMRC.
We sell marginal goods - just to clarify we still need to charge VAT on shipping is that the case for you?
However linnworks is causing us massive headache with EU VAT and Marginal VAT which at the moment we have to do manually.
I'm a bookseller who has just recently switched over to Linnworks and was rather surprised to find that software of this caliber can't handle UK VAT regulations correctly. The software I used previously handled this correctly right out-of-the-box.
You are not alone as a recent Facebook post shows that Linnworks has been unwilling to correct this flaw/oversite for years although I can't say if it has been through ignorance or neglect.
It is not through ignorance unfortunately. When I raised it with Linnworks, they went away and asked various members of staff, and came back telling me that as it was not in demand they would not be able to implement this. They said that as it was only me that wanted this feature, and implementing that feature would cost lots of time and money, it was not a justifiable business decision.
I would fully appreciate this if I was asking for a non essential feature, I would not expect them to create that just for me with me paying them for it. However this is not an optional feature, it is an essential bookkeeping need.
I do wonder how many companies have not noticed this as we have, and are recording and submitting incorrect VAT returns. It had gone unnoticed by us for many years, and I then had to pay quite a hefty sum in accountancy fees to correct the past VAT returns.
First of all I was told I was wrong and that VAT should be applied to all shipping.
I told them that they were wrong and supplied the evidence.
They also said to me today "It is quite a rare situation though and before there were no requests"
I then told them of my previous Facebook post in which several people had previously asked for this error to be corrected as far back as four years ago!
Then I was told that no one had asked through the correct channels, so I showed them your post.
Now they want me to pay for a macro to sort it out. Yes, they want me to pay them to fix Linnworks so that it handles UK VAT regulations correctly!
You couldn't make it up.
And just in case anyone from Linnworks reads this, all of the item groups below are zero rated for VAT:
Protective boots and helmets for industrial use
Children’s clothes and footwear
Low vision aids
Children’s painting and picture books
Maps and charts
Printed or copied music
the records from Linnworks is impossible to complying with Making Tax Digital
I received the below responses 9 months ago:
I have double-checked the information but an item tax rate doesn't affect the postage tax rate.
You can take a look at the documentation stating that the postage is calculated based on customers' country. - https://www.linnworks.com/Doc/Order_tax_calculation_country_tax_rate
The postage tax rate remains no matter how much tax was applied on the item.
Would it be possible to send us a sort of link that can show the item tax should be same with the postage? It would shed some light for us to understand.
However, I have checked there was actually a feature request to our developers in regards to this matter but it was declined because:
There is no means by which Linn Systems can safely confirm that the shipping costs charged to the seller match exactly those charged to the customer at checkout and therefore we have to apply tax to the shipping charged to the seller.
It seems the only workaround for this would be to build shipping cost into the item and offer free shipping which then means there is no additional shipping costs incurred by the buyer.
I'm very sorry this cannot be achieved by current functionality but I would still recommend you post this idea to our Feature Request page as it can be reconsidered if there are plenty requests for it - https://help.linnworks.com/support/discussions/forums/7000001680