How to set up UK VAT in Magento

There didn’t seem to be much online to show how to add VAT to Magento sites trading in the United Kindgom so after a little trial and error I’ve identified the actions required.

Set up Product Classes

  • From the sales menu, select the Tax option and then the Product Tax Class.
  • Add three new classes; VAT Standard, VAT Reduced and VAT Zero
  • If only shipping to the UK all other tax rates can be deleted.

Set up Customer Classes

  • From the sales menu, select the Tax option and then the Customer Tax Classes
  • Check that Retail Customer is listed, if not then add new

Set up Tax Zones and Rates

  • From the sales menu, select the Tax option and then the Manage Tax Zones and Rates option
  • Remove US rates
  • Add three new rates
    • VAT Standard rate; country = United Kingdom and Rate = 15.00 (this will change back to 17.50 in January 2010)
    • VAT Reduced rate; country = United Kingdom and Rate = 5.00 (current rate for reduced VAT)
    • VAT Zero rate; country = United Kingdom and Rate = 0.00

Set up Tax Rules

  • From the Sales menu, select the Tax option and then the Manage Tax Rules
  • Add three new tax rules highlighting classes and rates to select.
    • VAT Standard
      • Name = VAT Standard
      • Customer Tax Class = Retail Customer
      • Product Tax Class = VAT Standard
      • Tax Rate = VAT Standard Rate
    • VAT Reduced
      • Name = VAT Reduced
      • Customer Tax Class = Retail Customer
      • Product Tax Class = VAT Reduced
      • Tax Rate = VAT Reduced Rate
    • VAT Zero (you get the idea…)
      • Name = VAT Zero
      • Customer Tax Class = Retail Customer
      • Product Tax Class = VAT Zero
      • Tax Rate = VAT Zero Rate

Applying Tax Classes to Products

Once the rules, rate and classes have been set the Tax Class will be visible within the product price details screen when adding and amending products.

Configuring the Display

Visit UK VAT – Simple Approach to see how to configure the tax for display.

17 thoughts on “How to set up UK VAT in Magento

  1. Daniel Harris says:

    When showing prices Inc and Excl VAT, by default Magento seems to display as “Tax” but I need it to say “VAT”

    I tried setting this up under “Manage Tax Zones & Rates” by setting a “Tax Title” to VAT in the English site. But across the site it still shows as the word “Tax” instead.

    Any idea why? I have flushed the cache and re-indexed everything just incase but with no luck 🙁

  2. Luke says:

    Hi, I have managed to install the English language pack which has changed the common words and added VAT to the shopping cart. However, all of my products on their product pages still show ‘TAX’. any ides on how I can change this to show VAT instead?

  3. steve says:

    Hi there, I am very grateful for this help. Theres just one thing puzzling me at the moment.

    How do you get all the vat countries to be charged/show vat but not show for countries like america where we don’t have to charge vat?

    I have tried some orders and at the moment this seems to add vat to everything, and doesnt seem to give me an option of choosing vat free (some products we sell are vat free everywhere)

    Thanks in advance,

    • Julie says:

      Hi Steve,
      I’m not an expert on shipping to EU and non-EU countries but if goods being exported outside the EU can be zero-rated (see business link website) then a second zero tax rate based on location could be used within your tax rate list.

  4. Richard says:

    Thanks Julie, this was just what I needed. Saved me loads of time wading through the documentation. The latest VAT rates for any one interested are VAT standard: 20%, VAT reduced: 5%, and of course 0% for VAT zero, correct on 20th Feb, 2011. Now to add the language pack…

  5. Julie says:

    Glad this helped you Ste and Richard. As Richard says, VAT is now at 20% but that was a simple change of the standard rate value.

    With this set up it’s pretty easy to change the rate whatever the Chancellor decides to do next.

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