Your Shopify invoice shows no VAT, just a line saying the fee is "subject to the reverse charge". So you assume there's nothing to do. That's the mistake we see most often, and it's wrong.
When Shopify bills you from Ireland and charges no VAT, the responsibility for accounting for that VAT shifts to you. You have to put the VAT on your own UK VAT return, on both the output side and the input side. Get it wrong and your VAT return is misstated, even if no extra tax actually ends up being due.
This guide shows you exactly which boxes to fill in, with the real figures and a worked example. It's written for UK VAT-registered Shopify sellers and the bookkeepers who do their returns.
Why is there no VAT on your Shopify invoice?
Shopify invoices UK and EU merchants through Shopify International Limited, an Irish-registered company. Because your supplier belongs outside the UK and you belong in the UK, the place of supply for these business-to-business services is the UK, so it's you, not Shopify, who accounts for the VAT.
Shopify doesn't add VAT to the invoice once you've given it a valid UK VAT number. Instead it prints a note that the supply is subject to the reverse charge. That note is your cue to self-account, not a sign that the fee is VAT-free.
This applies to your Shopify subscription, transaction fees, app charges billed through Shopify and Shopify-billed themes. It does not change your separate duty to charge UK VAT on your own sales at the standard rate of 20% for 2025/26.
What is the reverse charge, in plain English?
The reverse charge is a direct answer for any Shopify seller: it's a mechanism where you, the UK buyer, account for the VAT that an overseas supplier would normally charge, by adding it to your own VAT return as both output tax and input tax in the same period.
HMRC's guidance on the place of supply of services puts it simply. You credit your VAT account with output tax on the full value of the service received, then at the same time you debit your VAT account with the input tax you're entitled to reclaim under the normal rules.
The reverse charge applies to almost all business-to-business services bought from outside the UK, except those that are exempt from VAT. Shopify's platform fees are standard-rated services, so they're firmly within it.
In most cases the two entries cancel out and there's no extra VAT to pay. The point is that you still have to record both sides. The VAT return has to be right, not just the final figure.
Which VAT-return boxes do Shopify fees go in?
Here is the direct answer. For each VAT period, take the total Shopify fees you've been billed (in sterling), work out the notional UK VAT at 20%, and complete four boxes:
| Box | What it is | What to enter for Shopify fees |
|---|---|---|
| Box 1 | VAT due on sales and other outputs | Add the notional VAT at 20% on your Shopify fees (the reverse-charge output tax) |
| Box 4 | VAT reclaimed on purchases | Add the same VAT figure, if you can recover it under the normal rules |
| Box 6 | Total value of sales and other outputs | Add the net value of the Shopify fees |
| Box 7 | Total value of purchases and other inputs | Add the net value of the Shopify fees |
A few points that trip people up:
- The same VAT amount goes in both Box 1 and Box 4. For a fully taxable business, they cancel out and the net VAT effect is nil.
- The net fee value goes in both Box 6 and Box 7. HMRC's VAT return guidance confirms reverse-charge transactions belong in both the outputs total (Box 6) and the inputs total (Box 7). Yes, a purchase appears in your sales total, that's how the reverse charge works.
- You convert the fee to sterling using a correct exchange rate before you start. If Shopify already bills you in GBP, use that figure.
- If your business is partially exempt, you may not recover all of the Box 1 VAT in Box 4, so a real cost can arise. Most Shopify sellers are fully taxable, so this won't bite, but it's worth a check if you have any exempt income.
Worked example: a month of Shopify fees
Illustrative example. Priya runs a fully VAT-registered Shopify homeware store. In a VAT quarter, Shopify International Limited bills her, with no VAT charged and a reverse-charge note on the invoice:
- Shopify subscription: £276 (3 months at £92)
- Shopify-billed apps: £84
- Total net fees: £360
Priya works out the notional UK VAT at the standard rate of 20% for 2025/26:
- £360 x 20% = £72
She completes her return as follows:
| Box | Figure | Why |
|---|---|---|
| Box 1 | + £72 | Reverse-charge output VAT at 20% on £360 |
| Box 4 | + £72 | Same VAT recovered as input tax (fully taxable business) |
| Box 6 | + £360 | Net value of the Shopify fees in the outputs total |
| Box 7 | + £360 | Net value of the Shopify fees in the inputs total |
Check the arithmetic: £360 x 20% = £72, and £72 in Box 1 minus £72 in Box 4 is £0. The reverse charge costs Priya nothing in tax, but both her boxes and her totals are now correct. These figures are added to everything else on the return, they don't replace it.
If you'd rather not hand-key this every quarter, our Shopify accountants set the reverse charge up once in your bookkeeping software so it posts automatically from the Shopify invoice.
What if you are not VAT registered yet?
This is the part that catches new sellers out. The value of reverse-charge services you receive from abroad counts towards the VAT registration threshold, alongside your own taxable sales.
HMRC's place-of-supply guidance is explicit: you add the value of these services to the value of your own taxable supplies when working out whether you have to register. For 2025/26 the VAT registration threshold is £90,000.
In practice the Shopify fees themselves are rarely large enough to push a seller over £90,000 on their own. But if you're already trading close to the threshold, the fees can be the straw that tips you over, and ignoring them can mean registering late.
If you're weighing up whether and when to register, our self-assessment and VAT support can run the numbers with you before a deadline forces the decision.
What if you did not give Shopify your VAT number?
If you haven't added a valid UK VAT number to your Shopify account, Shopify may charge Irish VAT on your fees instead of applying the reverse charge. That's a genuine cost you generally can't reclaim on your UK VAT return, because it's foreign VAT, not UK VAT.
The fix is straightforward. Add your UK VAT number in your Shopify tax settings so future invoices are issued under the reverse charge with no VAT. Then account for those fees using the four boxes above.
Always work from the invoice itself. If it shows a reverse-charge note and no VAT, you self-account. If it shows Irish VAT, you don't put anything in your reverse-charge boxes for that invoice.
Common mistakes we fix on Shopify VAT returns
- Treating "no VAT shown" as "nothing to do". The reverse charge note means the opposite. You account for the VAT yourself.
- Filling in Box 1 but forgetting Box 6 and Box 7. The values matter even though the tax nets to nil. HMRC expects reverse-charge values in both totals.
- Reclaiming Irish VAT on a UK return. Foreign VAT charged because no VAT number was supplied is not reclaimable through your UK VAT return.
- Forgetting the threshold test. Reverse-charge service values count towards the £90,000 registration threshold for 2025/26.
FAQs
Do I pay VAT on Shopify fees in the UK?
If you're UK VAT registered and you've given Shopify a valid VAT number, Shopify charges no VAT. You account for it yourself under the reverse charge by adding notional VAT at 20% to Box 1 and, where recoverable, the same amount to Box 4. For a fully taxable business there's no extra tax to pay.
Which VAT-return boxes do Shopify fees go in?
Four boxes. The notional VAT at 20% goes in Box 1 (output tax) and Box 4 (input tax, if recoverable). The net fee value goes in Box 6 (outputs total) and Box 7 (inputs total).
Why does a Shopify purchase appear in my Box 6 sales total?
Because the reverse charge treats you as if you'd supplied the service to yourself. HMRC's VAT return guidance confirms that reverse-charge transactions are included in both the Box 6 outputs total and the Box 7 inputs total.
Do Shopify fees count towards the VAT registration threshold?
Yes. The value of reverse-charge services from abroad is added to your own taxable supplies when testing the £90,000 registration threshold for 2025/26. They're rarely large enough to push you over on their own, but they count.
What if Shopify charged me Irish VAT?
That usually means no valid UK VAT number was on your account. Irish VAT is foreign VAT and isn't reclaimable on your UK VAT return. Add your VAT number in Shopify so future invoices use the reverse charge, then account for them in the four boxes above.
Key takeaways
- Shopify bills UK sellers from Ireland with no VAT and a reverse-charge note. You self-account.
- Put notional VAT at 20% in Box 1 and (if recoverable) Box 4, and the net fee value in Box 6 and Box 7.
- For a fully taxable business the VAT nets to nil, but the return must still show it.
- Reverse-charge fee values count towards the £90,000 VAT registration threshold for 2025/26.
Want this set up so it posts itself every quarter? Book a free 20-minute call with a Zmartly accountant who works with Shopify sellers every day. Talk to our Shopify accounting team.
