You've switched on Shopify B2B, set up a wholesale price list, and a trade buyer has just asked you to invoice them without VAT because they're "VAT registered". Now you're not sure whether that's allowed, what evidence you need, or what happens if the buyer is in the EU.
This guide walks through it the way we'd talk it through with a client. When you charge VAT on wholesale, when the reverse charge takes over, how to check a buyer's VAT number is genuinely valid, and how it all lands on your VAT return.
It's written for UK-based Shopify sellers running B2B or wholesale alongside (or instead of) retail. If that's you, our page for Shopify sellers sets out how we handle the whole picture, from bookkeeping to the VAT return itself.
All figures are for the 2025/26 tax year and the current VAT rules, with the gov.uk sources listed at the end.
Does B2B or wholesale mean you don't charge VAT?
No. Selling to another business does not, on its own, make a sale VAT-free. If you're VAT registered and you sell standard-rated goods to a UK trade buyer, you charge 20% VAT just as you would to a consumer. The buyer being VAT registered changes who can reclaim the VAT, not whether you charge it.
That's the single biggest myth in Shopify wholesale. "B2B" is a sales channel, not a VAT exemption. The things that actually change the VAT treatment are where the customer belongs, whether the goods cross a border, and whether you're selling goods or services.
So before you zero-rate anything or leave VAT off an invoice, work through three questions:
- Are you VAT registered at all?
- Where is the customer, and are the goods leaving the UK?
- Is this a sale of goods or a sale of services?
The rest of this guide answers each one.
<h2 id="do-you-need-to-be-vat-registered">Do you need to be VAT registered to sell B2B on Shopify?</h2>
Only once your taxable turnover crosses the threshold. For the current rules you must register for VAT when your VAT taxable turnover goes over £90,000 in any rolling 12 months, or if you expect to pass it in the next 30 days. The figure has been £90,000 since 1 April 2024.
Wholesale turnover counts towards that threshold exactly the same as retail turnover. A common trap is treating trade sales as somehow separate. They aren't. Add your B2B and B2C taxable sales together when you test the £90,000 line.
If you're below the threshold and not registered, you simply don't add VAT to any sale, retail or wholesale, and you can't reclaim VAT on your costs. The reverse charge and zero-rating rules below only matter once you're VAT registered.
<h2 id="uk-wholesale-vat">When do you charge VAT on a UK wholesale sale?</h2>
If you're VAT registered and selling to a UK business, you charge VAT at the normal rate for the goods. For most physical products that's the standard rate of 20%. Some goods are reduced-rated (5%) or zero-rated (0%), such as most children's clothing or books, but the rate is driven by what the product is, not by who is buying it.
A VAT-registered trade buyer can then reclaim that VAT as input tax on their own return, so the VAT charge usually washes out for them. That's why charging VAT correctly on a UK B2B sale rarely costs your customer anything in real terms. It's a cash-flow timing point, not a true cost.
You do not apply any reverse charge to a normal UK-to-UK sale of goods. The reverse charge for goods only comes into play in the cross-border situations below. (There is a separate domestic reverse charge for construction services, but that's a specialist regime and does not apply to a typical Shopify product seller.)
<h2 id="what-is-the-reverse-charge">What is the reverse charge, and when does it apply?</h2>
The reverse charge is an accounting mechanism where the customer, not you, accounts for the VAT. You don't add VAT to the invoice. Instead the buyer puts the VAT through their own return as both output tax and input tax, so HMRC still sees the VAT, just from the other side of the deal.
For a Shopify B2B or wholesale seller, the reverse charge realistically shows up in two situations.
Selling services to a business in another country
If you supply services (design, consultancy, a SaaS subscription, marketing) to a business customer who belongs in another country, the general business-to-business rule is that the supply is made where the customer belongs. As HMRC puts it, "the B2B general rule for supplies of services is that the supply is made where the customer belongs." That usually puts the supply outside the scope of UK VAT, and the overseas business customer accounts for VAT under the reverse charge in their own country.
To rely on this, you need evidence your customer is genuinely in business. HMRC's guidance is blunt about the best evidence: "For EU customers their VAT registration numbers is the best evidence that your EU customer is in business." Keep that number on file.
Low-value goods sent into the UK to a VAT-registered business
If you're an overseas seller (or hold stock abroad) sending consignments of £135 or less directly to UK customers, UK supply VAT is normally due at the point of sale rather than at import. But where the buyer is a UK VAT-registered business and gives you a valid UK VAT number, HMRC says "the VAT will be accounted for by the customer by means of a reverse charge." You then add a note to the invoice such as "reverse charge: customer to account for VAT to HMRC."
The £135 limit applies to the value of the whole consignment, not each item, and it excludes separately shown transport and insurance. Above £135, normal import VAT and customs rules apply instead.
<h2 id="check-vat-number">How do you check a buyer's VAT number is valid?</h2>
This is the step Shopify wholesale sellers skip most often, and it's the one HMRC will ask about if your treatment is ever challenged. If you zero-rate or reverse-charge a sale on the strength of a VAT number that turns out to be wrong, the VAT can land back on you.
For UK numbers, use HMRC's free "Check a UK VAT number" service. It tells you whether a UK VAT registration number is valid and shows the name and address of the business it's registered to, so you can confirm it matches your buyer. You cannot search by company name; you need the number itself, which you'll find on the buyer's invoice, website or trade application.
There's a feature worth using every time. HMRC states: "If you are a UK VAT-registered business, you can also use this service to prove when you checked a UK VAT number. You will need your own VAT number to do this." Enter your own number and HMRC gives you a dated reference. Save it against the order. That timestamped proof is exactly the audit trail you want if HMRC ever queries why you didn't charge VAT.
For EU customers, validate the number through the EU's VIES service before treating a service supply as outside the scope of UK VAT. Either way, the principle is the same: check it, screenshot or reference it, and store it with the order. In Shopify you can capture the VAT number on the B2B company profile and attach the check reference in your order notes or accounting system.
<h2 id="selling-overseas">How does VAT work when you sell wholesale to the EU or rest of world?</h2>
Once goods physically leave the UK, you're into export and place-of-supply rules, and the answer depends on where the goods go and who arranges the shipping.
Exporting goods outside the UK
A genuine export of goods can be zero-rated, but only if you meet HMRC's conditions. You must export the goods within the time limit (generally 3 months) and obtain and keep valid official or commercial evidence of export, such as a customs declaration, air waybill or bill of lading, within the same period. HMRC is clear that "all of your evidence must provide a clear audit trail of the goods from sale to export." No evidence, no zero-rating, so build proof of export into your fulfilment process from day one.
Selling goods to EU consumers
If you sell goods to EU consumers (rather than businesses), the Import One Stop Shop (IOSS) can simplify VAT on consignments of £135 or less imported into the EU. You register for IOSS, charge the customer's local VAT at the point of sale, and report it through a single return rather than registering in every EU country. The OSS Union scheme is a separate mechanism aimed at distance sales of goods from Northern Ireland to the EU, so check which one actually fits your supply chain before registering.
Selling services overseas
For services to overseas businesses, you're back to the B2B general rule covered above: outside the scope of UK VAT, with the customer accounting for VAT under the reverse charge, provided you hold evidence the customer is in business.
<h2 id="worked-example">Worked example: a Shopify wholesale order and the VAT return</h2>
Illustrative example. Northbrook Supplies is a fictional VAT-registered Shopify seller of homeware. In a quarter it makes three wholesale orders. Here's how each is treated and where it lands on the VAT return.
| Order | Customer | Goods value | VAT treatment | VAT charged |
|---|---|---|---|---|
| A | UK trade buyer, VAT registered | £2,000 | Standard-rated UK B2B sale | £400 (20%) |
| B | German retailer, goods shipped to Germany, valid EU VAT number held | £3,000 | Export of goods, zero-rated (export evidence retained) | £0 |
| C | UK design studio buying a one-off branding service | £1,500 | Standard-rated UK service | £300 (20%) |
For order A, you charge £2,000 plus £400 VAT and invoice £2,400. The £400 is output tax in Box 1 of your VAT return.
For order B, because the goods are exported and you hold valid export evidence within the time limit, the sale is zero-rated. You charge £3,000 with £0 VAT. The net value still goes in Box 6 (total sales excluding VAT), but no output tax arises.
For order C, a UK-to-UK service, you charge £1,500 plus £300 VAT. The £300 is output tax in Box 1.
Adding it up: output tax for the quarter from these orders is £400 + £0 + £300 = £700, sitting in Box 1. The combined net sales of £2,000 + £3,000 + £1,500 = £6,500 feed into Box 6. You'd then deduct your input tax (VAT on your own costs) in Box 4 to arrive at the net VAT payable. The figures here are illustrative, but the routing is the real-world routing.
Notice what made order B safe to zero-rate: the goods actually left the UK, and Northbrook kept the export evidence. The VAT number on file confirmed the customer was a business, but it was the export and the proof of it that justified the 0% rate.
<h2 id="b2b-invoice">What should a B2B Shopify invoice show?</h2>
A full VAT invoice must show a unique sequential number, the time and date of supply, your name, address and VAT number, and the name and address of the customer. It also needs a description of the goods or services, the quantity, the VAT rate and net amount per line, the total net payable, and the total VAT chargeable expressed in sterling.
Where the reverse charge applies, the invoice should make that clear. For low-value goods to a VAT-registered UK business, HMRC's suggested wording is a note such as "reverse charge: customer to account for VAT to HMRC." For cross-border B2B services, a similar reverse-charge note tells the customer they must account for the VAT.
Shopify's default order confirmation is not a compliant VAT invoice on its own. Make sure your invoicing setup, whether a Shopify app or your accounting software, produces documents that carry all of the above and pull through the buyer's VAT number on B2B orders.
Getting the invoice right matters as much as getting the VAT decision right. The invoice is the evidence that your treatment was correct.
Frequently asked questions
Do I charge VAT on a Shopify wholesale order to a UK business?
Yes, if you're VAT registered and the goods are standard-rated, you charge 20% VAT to a UK trade buyer just as you would to a consumer. The buyer being VAT registered lets them reclaim that VAT; it doesn't make your sale VAT-free. The reverse charge does not apply to a normal UK-to-UK sale of goods.
Can a customer's VAT number make my Shopify sale VAT exempt?
Not by itself. A VAT number is evidence the customer is in business, which matters for cross-border services and certain overseas goods. But a normal UK B2B sale of goods is still standard-rated. Zero-rating depends on the goods being exported with evidence, not simply on the buyer holding a VAT number.
How do I check a UK VAT number is valid?
Use HMRC's free "Check a UK VAT number" service. It confirms whether the number is valid and shows the registered business name and address. If you enter your own VAT number too, HMRC gives you a dated reference proving when you checked, which is useful evidence if your VAT treatment is ever queried.
When does the reverse charge apply to my Shopify B2B sales?
Most commonly when you supply services to a business in another country (the customer accounts for VAT where they belong) or when you, as an overseas seller, send goods of £135 or less to a UK VAT-registered business that gives you a valid UK VAT number. It does not apply to standard UK-to-UK goods sales.
Do I charge VAT when I sell wholesale to an EU business?
If the goods are exported from the UK to the EU and you keep valid export evidence within the time limit, the supply of goods can be zero-rated. If you're supplying services to an EU business, the B2B general rule usually puts it outside the scope of UK VAT, with the customer accounting for VAT under the reverse charge.
Talk to an e-commerce accountant →
Talk to an accountant who knows Shopify
VAT on Shopify B2B and wholesale is one of those areas where a single wrong assumption can quietly build a liability over many orders. If you'd like a second pair of eyes on your VAT treatment, your invoices, or your overseas sales, our team can help.
Book a free call with a Zmartly accountant through our Shopify sellers page, and we'll make sure your VAT is set up correctly from the first wholesale order onwards.
