On our web site we charge a flat rate of £1.50 postage, recently my wife had a product promoted by a magazine which gave the price as inclusive of postage. To meet with the promotional wording we have sold the product at the price shown in the magazine at £19.00 without showing any postage cost. For income accounting and VAT can I still show the sales price as £17.50 and postage of £1.50. The postage actually costs more.

Hi Tom,

Our understanding is that your choice of whether to show postage separately will not affect your VAT return. This is because you charge customers the same rate of VAT on the postage as the product itself. See here for a discussion of this:
http://www.ukbusinessforums.co.uk/forums/showthread.php?t=47787
(Note: I am not an expert on this - you should check this information with your accountant.)

In your accounts you can distinguish between the the types of income by having two lines on the transaction: one allocated to 'Sales Income' and the other allocated to 'Shipping Fees Collected'.

Cheers,

You are right Mark, after checking I need to add Vat to postage.