This is an unusual one. In the e-commerce system I use, Trading Eye, it’s always bugged me that we had to input the Post & Packaging less VAT. The system then adds VAT on at the check out. When someone pointed out this may be illegal I’ve been tasked with finding out if that is the case.

Here’s my findings:
http://forums.moneysavingexpert.com/showthread.html?t=432573
http://www.ukbusinessforums.co.uk/forums/showthread.php?t=47787
http://community.actinic.com/showthread.php?t=21157
http://www.your-book.co.uk/comments.htm

Summary: Adding VAT to P&P is standard practice as it’s classed as a service and is therefore VAT-able.